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A recent study has revealed that too many financial institutions continue to fall short of first‐class compliance. They are failing to recognize and close the gap between the historical checklist approach to compliance and whatever is required to assess and mitigate the totality of risks an organization may encounter. These organizations leave themselves extremely vulnerable to reputational damage with their customers, regulators, and other stakeholders. As part of the study entitled Compliance: A gap at the Heart of Risk Management, 160 executives responded to an in‐depth global survey on the subject of compliance. Alarmingly, less than one‐fifth of survey participants considered awareness of compliance‐related risks to be high across all parts of the business and fewer than one‐quarter were very confident in their full compliance with regulatory requirements and internal codes and policies.

The purpose of this paper is to assist investment company managers in proactively navigating the risky and ever‐changing market and regulatory environment and to provide an outline for a flexible and robust risk‐based compliance management methodology.

The paper makes recommendations on: becoming familiar with best practices in internal controls and regulatory trends, reassessing compliance management goals and objectives, identifying risk scenarios and related compliance events, designing control systems, updating compliance policies and procedures, and conducting periodic reviews of compliance management systems.

The paper reveals that compliance risks have attained a new level of visibility. To minimize potential hazards, current and evolving risks must be identified, documented and effectively managed by investment firms, regulators and legislators.

The paper provides practical advice by a compliance management systems provider and a consultant specializing in compliance and risk‐based due diligence consulting.

The authors' paper aims to examine the organizational issues that come from the recent establishment of the compliance function in Italian banks.

The authors' paper takes as a starting point the Bank of Italy's regulations and the existing literature on compliance, in order to create a theoretical model of an efficient internal control system.

For each organizational structure of compliance, the authors' paper describes strengths and weakness. It also outlines the scopes of compliance and internal audit in order to avoid overlaps. Having regard to the similarities between operational risk and compliance risk, the study identifies cooperation areas so as to achieve synergies, in terms of costs, and a better operational efficiency.

The authors' paper focuses mainly on the relationship between compliance, on one side, and internal audit and risk management on the other. It focuses also on the positioning of compliance within the internal control system, as it has been regulated by the Italian disposals. Further research could concern the relationship with other functions and the regulations of other countries.

The authors' paper identifies cooperation forms between the internal control system functions. This is the way to suggest organizational solutions able to improve banking efficiency.

This subject has not been analyzed in depth to date. This article attempts to obtain an identification of the roles and responsibilities of the main functions involved in the internal controls system, in order to define organizational models characterized by complementarity of interventions and thus oriented towards the objectives of effectiveness and efficiency.

This study aims to investigate the extent of Shariah compliance in wakalah sukuk and Shariah non-compliant risk disclosure in the sukuk documents and to analyse the risk management techniques associated with the disclosed risks.

This study uses qualitative document analysis as both data collection and analysis methods. The document analysis acts as a data collection method for 23 wakalah sukuk documents selected from 32 issuances of wakalah sukuk from 2017 to 2021. These sukuk documents were selected based on their availability from relevant websites. Document analysis, both content analysis and thematic analysis, were used to analyse the data. Codes were grounded from that data through keywords search of Shariah noncompliant risk and its risk management. Besides these, interviews were also conducted with four active industry players, i.e. two legal advisors of wakalah sukuk, a wakalah sukuk trustee and a sukuk institutional issuer. These interview data were analysed based on categorical themes, on the aspects of the extent of Shariah compliance in sukuk, and the participant’s views on the risk management techniques associated with the risks or used in the sukuk documents.

Overall, the findings reveal three types of Shariah non-compliant risks disclosed in the sukuk documents and seven risk management techniques associated with them. However, the disclosure and the risk management techniques can be considered minimal in contrast to the extent of Shariah compliance in a sukuk, i.e. Shariah compliance at the pre-issuance stage, ongoing stage and post-issuance stage. On top of these, it was also found from the interviews that not all risk management techniques are workable to manage Shariah non-compliant risk in sukuk. As a result, these findings suggest rigorous reviews of the existing Shariah non-compliance risk (SNCR) disclosures and risk management techniques by the relevant parties.

Sukuk documents used in the study are limited to corporate wakalah sukuk issued in Malaysia. Out of 32 issuances from 2015 to 2021, only 23 documents are available in relevant website. Thus, Shariah non-compliant risk disclosure and its risk management techniques analysed in this study are only limited in those documents.

The findings of this study suggest rigorous reviews on the existing Shariah non-compliance disclosures and risk management techniques. Other than these, future research in relation to uncommon risk management clauses, i.e. assurance, Shariah waiver and transfer of risk, are needed.

The insights presented in the analysis are of importance to sukuk issuers and the sukuk due diligence working group in enhancing the sukuk Shariah compliance and Shariah non-compliant risks disclosure and towards sukuk investors, in capturing and assessing Shariah non-compliant risks in a sukuk and to assist them to make informed investment decisions. More importantly, this study has found few areas of future study in relation to SNCR disclosures and SNCR risk management techniques.

The aim of this chapter is to investigate the relationship between ethics, risks of compliance failure and strategic value of global responsibility for BRICS companies. The first part of the chapter adopts a theoretical approach: it introduces and analyzes the key role of compliance risk management for sustainable and successful development of companies. The second part of the chapter uses an empirical approach, based on the case study method. The chapter focuses on the BRICS. The chapter demonstrates that mere formal compliance with laws, recommendations, and internal codes is not sufficient for companies that want to be responsible and attract stakeholders’ consent and resources. A shared background of ethical principles is required for a proper understanding of the rules, in order to prevent the risk of compliance failure and limit the global risk exposure of a company. Due to the business perspective adopted in the research, this chapter leaves out the sociological aspects regarding how to create, spread, and strengthen the culture of compliance within a company. The chapter encourages companies to connect ethical principles and compliance with the rules. Indeed, a lack of ethics in business operations, obscured by formal compliance, often results in indirect negative impacts on stakeholder relationships, so it is only a futile attempt to act responsibly. The originality of the chapter consists in suggesting the adoption of a responsibility-oriented approach for compliance risk management.

This paper seeks to recommend a way for the compliance function to identify, monitor, and report the risks it faces to the firm's management.

Outlines the principal challenges in setting up a risk reporting system and recommends a three‐phase approach for implementing such a system.

Developing a risk reporting system presents three challenges: designing a reporting system driven in real time by compliance work with a varied data set, organizing the information and processes of the compliance function so they can be automated, and arranging the presentation of risk to reflect complex organizational structures. The three phases for implementing such a system are gaining management sponsorship, looking for pilot projects to score quick victories, and rolling out the program.

An overview of compliance risk reporting systems that stresses the importance of collecting the right data in an automated fashion.

The purpose of this paper is to find out how effectively implemented are measuring approaches to compliance and whether there is a correlation between the measures implementation, financial specialisation and international activity. The authors evaluate if the regulatory framework implies a measure cost asymmetry, depending both on the proportionality principle and on the existence of different supervisors with an heterogeneous set of enforcement rules.

The analysis is based on a survey involving 84 financial firms (banks, investment companies and insurance companies). Two criteria have been used to interpret the results: the prevailing workability within international and domestic intermediaries; the intermediary typology, creating a distinction between banks other financial intermediaries (FIs) and insurance companies.

Italian financial firms are sensitive to minimise sanctions, but the reputational impact is becoming more important. International firms are more sophisticated than domestic ones for their ability to measure both the probability of non‐compliance events and their severity. Banks show the highest attitude to adopt insurance or financial contracts to minimise the negative impact of non‐compliant behaviours. Small FIs are late in measuring the exposure and losses due to non‐compliance actions.

Four years after the Basel Document on compliance, a large percentage of firms is still managing the process within a function with different purposes; nevertheless, reputational impact has become more important. Small intermediaries show a lower attitude to implement a risk management approach, with a capital management sensitivity. This finding addresses the question about the existence of size effect which could reduce the compliance attitude.

The objective of this paper is to highlight the results of a survey on compliance practices in Italian financial institutions (Italian banks and branches in Italy of foreign banks).

The survey is carried out through a structured questionnaire, arranged into several sections: general information on the definition and framework of compliance risk, organizational structure, reporting, culture, purpose and tasks of the compliance staff, assessment of the compliance staff performance and of the risk. The survey is mainly developed on two issues: organizational and risk assessment implications.

It is found that many survey participants are responding positively to regulation developments, since there is a widespread recognition of compliance as a key element for creating value and improving reputation. It is also found that the Italian banks surveyed, whose compliance activities have been usually performed by internal audit, dedicate less attention to compliance matters in comparison with the branches of foreign banks. The institutions interviewed underline the need to have clear guidelines from supervisory authorities, so that they can achieve an effective and efficient management of compliance risk.

This subject has not been analyzed in depth to date. This paper provides a representative view of the management of compliance risk in Italian banks, thanks to the variety of the issues under observation and the size of the sample.

The purpose of this paper is to investigate compliance with risk disclosure requirements under International Financial Reporting Standard (IFRS) 7 by Malawian Stock Exchange-listed companies over a three-year period. Specifically, the paper examines the extent and determinants of risk disclosure compliance with IFRS 7.

The study uses a mixed-method approach. The quantitative approach employs the research index methodology and uses panel data regression analysis to examine the relationship between proportion of non-executive directors (NEDs), size, gearing and profitability and the extent of risk disclosure compliance. The results of the panel data regression analysis are triangulated by the qualitative research approach in the form of personal interviews with company managers.

The results indicate that over the three years, the extent of compliance with IFRS 7 is, on average, 40 per cent which is very low. The regression results suggest that NEDs, size and gearing are significantly and positively associated with the extent of risk disclosure compliance under IFRS 7. The results of qualitative approach are mixed since some support and whilst others contradict the regression results.

The sample size is very small which may affect the generalisability of the study.

The use of a mixed-methods approach to examine the determinants of risk disclosure compliance provides additional insights not provided in prior studies. The contradicting results suggest that more research using the mixed approach is required to provide more robust evidence of the determinants of risk disclosure compliance.

This paper aims to investigate whether executive compensation and internal control can prevent overseas compliance risks through the mediating influence of multinational corporation (MNC) legitimacy and the moderating role of institutional distance.

Based on a law and economics perspective and the “bad apple,” the “red barrel” and the “bad cellar” theory of business misconduct, this paper constructs a systematic framework of “compliance motivation MNC legitimacy overseas compliance risk prevention” from the individual, organizational and systematic levels and uses data of Chinese MNCs for empirical analysis.

Empirical data from Chinese MNCs show that overseas compliance risks are comprehensively affected by the factors of the individual, organizational and systematic levels. Higher executive compensation and internal control will reduce MNCs’ overseas compliance risks through MNC legitimacy acquisition; institutional distance hinders the positive effect of internal control on MNC legitimacy and therefore aggravates overseas compliance risks.

This paper contributes to the understanding of the overseas law-abiding and offence behavior of MNCs from a law and economics perspective and offers valuable insights on how to prevent the ever-increasing overseas compliance risks.

Although the literature has analyzed the factors of compliance behavior, they are not interrelated, let alone integrated in a systematic risk prevention framework. This paper applies a law and economic analysis framework to the study of the overseas compliance risks for the first time.