What is the purpose of a compliance review in risk identification?

The purpose of a compliance review in risk identification is fundamentally about identifying risks associated with adherence to laws, regulations, and internal policies. When an organization conducts a compliance review, it systematically examines its processes and practices to ensure they meet the relevant regulatory requirements. This scrutiny helps to uncover potential compliance risks—such as violations or lapses—that could expose the organization to legal penalties, financial loss, or reputational damage.

By focusing on regulations, the compliance review enables organizations to proactively identify and mitigate risks before they escalate into major issues. It serves as a vital part of the risk management framework by allowing organizations to ensure they are operating within legal and regulatory boundaries while fostering a culture of accountability and compliance.

The other options do not directly relate to risk identification in the context of compliance. Enhancing profitability, assessing employee performance, and evaluating internal financial controls, while important, do not primarily serve the purpose of identifying compliance-related risks that could impact the organization’s legal standing or operational integrity.