What is a major benefit of legal and regulatory compliance in risk assessment?

Legal and regulatory compliance in risk assessment is primarily beneficial because it identifies and mitigates potential penalties that can arise from non-compliance with laws and regulations. Companies operate within a complex framework of legal requirements that govern their activities. By adhering to these regulations, organizations can proactively identify areas where they may be at risk for legal infractions, allowing them to implement necessary controls and changes to avoid fines, sanctions, or other punitive measures.

This proactive approach not only safeguards the organization from legal repercussions but also contributes to a more stable operational environment, where the risk of unplanned costs related to legal challenges is significantly reduced. Compliance efforts help in establishing a culture of accountability and ethical business practices within the organization, which can have wide-ranging positive effects beyond just legal compliance.

While there are various facets of business that compliance may influence, the focus here is on the direct relationship between compliance, risk management, and the avoidance of penalties, which makes this a critical benefit within risk assessment frameworks.