“Compliance risk” can be defined as the risk of legal or regulatory sanctions, financial loss, or damage to an organization’s reputation and franchise value; this type of risk may result when an organization fails to comply with the laws, regulations, or standards or codes of conduct that are applicable to its business activities and functions.
The Federal Reserve expects banking organizations to have in place an infrastructure that is able to identify and control the compliance risks facing their organization. Fortunately, many banking organizations in the United  BIS Review 7/2006  3  States substantially affected by these risks are ahead of the curve and have invested in enterprisewide corporate compliance.