NOTE: Although the author is a licensed attorney, nothing in this article is intended to serve as legal advice. The intent of this article is to distinguish the concepts described and to help readers improve their marketing messaging. If you require assistance with risk, compliance, or legal issues, please consult an attorney licensed in your state.
Marketers are often tasked with developing messaging relating to business exposure, especially when campaigns touch regulated industries, activities, or sensitive data. Yet in practice, many professionals use “compliance” as shorthand for risk, liability, and related concepts. While this may seem harmless, it can undermine credibility with target audiences, particularly if those audiences include executives, compliance officers, or legal teams who expect precision. Understanding the distinctions between risk, compliance, and legal liability will enable you to speak authoritatively to audiences who understand these concepts and must defend their organizations against them.
Below is a primer designed to help marketers sharpen their vocabulary and avoid missteps when speaking with stakeholders.
Risk: The Broad Lens of Exposure
What it is: Risk refers to any potential for negative outcomes that could impact an organization’s financial health, reputation, or operations. It’s the broadest of the three concepts, encompassing everything from market volatility and cybersecurity threats to reputational damage and underperformance. Risk is about probability and impact, rather than about breaking rules.
Contours of risk:
- Financial: Loss of revenue, increased costs, or diminished shareholder value.
- Operational: Disruption of business processes, supply chain issues, or campaign failures.
- Reputational/PR: Negative press, social media backlash, or erosion of customer trust.
- Strategic: Missed opportunities or competitive disadvantage.
Unlike compliance or liability, risk doesn’t always involve a regulator or court. A viral campaign that backfires may not break any laws, but it can still damage brand equity. Likewise, failure to anticipate changes to market conditions can jeopardize a company’s financial performance.
Other parties involved: Risk conversations often involve investors, boards of directors, and customers. These groups care about how exposure is managed and whether the organization is resilient.
Who manages it: Risk is typically overseen by finance teams, risk officers, and executive leadership. They employ frameworks such as Enterprise Risk Management (ERM) to quantify exposure and prioritize mitigation. As noted above, legal liability and regulatory compliance are part of this calculus, but corporations view “risk” as a much broader concept.
Marketing speak: Because “risk” is an umbrella term, the messaging challenge is less about misuse of the term and more about the lack of specificity. When discussing risk, it is important to specify the type of risk that your solution helps guard against. While some products and services aim to identify and manage risks at the organizational level, most aim to prevent specific negative consequences. Those specific consequences fit into an organization’s overall risk profile. Speaking to those consequences with precision is where credibility is built.
Compliance: Governmental Mandates
What it is: Compliance is the discipline of adhering to governmental regulations (federal, state, or local) and industry standards. Companies also monitor compliance with internal policies, but Compliance (Capital “C”) generally refers to external regulations and standards. Software solutions can help companies maintain compliance across regulatory areas, including data privacy (GDPR, CCPA), environmental regulations (EPA rules), workplace and safety (OSHA rules), and sector-specific regulations (healthcare, finance).
Contours of compliance management:
- Financial: Fines, penalties, or loss of licenses and permits.
- Criminal: In severe cases, violations can lead to criminal charges against executives.
- Reputational: Being labeled “non-compliant” can erode trust with regulators, partners, and customers.
- Operational: Business shutdowns, delays, or restrictions due to regulatory review.
Compliance is about whether a company is playing by the rules, not whether its strategy is smart or sustainable. As such, it includes well-defined subcategories of risk. The consequences of non-compliance are generally quite clear, although it may require a legal expert to translate complex regulations into language that laypersons can understand and act upon.
Other parties involved: The counterparts here include regulators, auditors, and industry watchdogs. They enforce standards and expect organizations to demonstrate adherence. In some cases, regulators work with companies to ensure future compliance. In other cases, they can impose significant financial penalties. For example, enforcement actions for non-compliance with EPA regulations on ozone-depleting substances can result in penalties exceeding $25,000 per day.
Who manages it: Compliance is managed by legal teams, compliance specialists, and sometimes external consultants. They interpret regulations, develop policies and procedures, train staff, and monitor adherence and assure complete and accurate reporting.
Marketing speak: Reference to compliance obligations must be specific. Ensure that marketing content, customer communications, and sales enablement resources reference the particular laws and regulations that your solution helps users comply with. It is also essential that the product and marketing teams maintain contact with legal teams so that messaging can be updated when laws or regulations change. If your materials reference outdated standards, you will lose credibility with your customers and prospects. It is a best practice to use blogs and other content to discuss such changes before they take effect.
Legal Liability: The Consequences of Breach or Negligence
What it is: Legal liability arises when an organization is held responsible to a third party for harm or damages. This is the most formal and enforceable of the three concepts. Liability can stem from breaches of contract, intellectual property disputes, false advertising, or negligence that causes physical or financial harm to third parties. Unlike risk or compliance, liability is adjudicated by a court or arbitration tribunal. While most legal disputes end in some form of settlement, such settlements are as enforceable as a court judgment. Judgments and settlements can result in liability ranging from hundreds to billions of dollars and require a company to take or refrain from future actions. Even a successful defense to a lawsuit can generate significant legal bills.
Contours of liability risk:
- Financial: Damages, settlements, or costly litigation.
- Criminal: In cases of fraud or misconduct, executives may face criminal charges.
- Reputational: Lawsuits attract media attention and can permanently damage brand trust.
- Operational: Legal disputes can stall partnerships, acquisitions, or product launches. Worse, if the dispute involves a customer or an important partner, it can inhibit a company’s ability to compete in entire markets.
Liability is the endpoint of exposure, whether that liability is created by judgment or settlement. Given the high cost of defense, most companies prefer to avoid legal disputes rather than expend resources fighting them. In other words, it is almost always better to avoid being sued, regardless of the outcome.
Other parties involved: Here, the counterparts are opposing parties, their legal counsel, and courts or arbitration tribunals. Unlike some compliance regulators, these parties are always adversarial and seek restitution or punishment.
Who manages it: Legal liability is managed by in-house counsel working with outside law firms. They defend the organization, negotiate settlements, and advise executives on exposure. Individual departments within companies may also become involved in legal disputes because their involvement in a matter may subject them to burdensome document production, depositions, court testimony, and adherence to the terms of settlement agreements.
Marketing speak: The most important aspect of marketing communications relating to legal liability is demonstrating how a solution can help customers avoid legal entanglements rather than discussing how to defend them successfully. Legal matters are expensive, and plaintiffs are typically aggressive in their pursuit of outcomes. Creating policies, procedures, and workflows that help customers avoid legal issues upfront is the most valuable assurance you can provide. Focus on your ability to assist customers in documenting circumstances in a manner that stops adverse legal action before it starts.
Why Marketers Must Get This Right
Risk, compliance, and liability are interconnected but distinct. Risk is about exposure, compliance is about adhering to rules, and liability is about avoiding lawsuits and the cost of defense. All three can bring financial pain, but the stakeholders, management structures, and reputational fallout differ.
For marketers, credibility depends on using the right term in the right context. Labeling a liability issue as “compliance” may sound naïve to legal counsel. Framing a reputational risk as “compliance” may sound amateurish to finance leaders. Precision in presenting your solution’s value signals professionalism and builds trust. Using these terms improperly or imprecisely can undermine that trust. Your customers and prospects live with these potential consequences daily. To effectively demonstrate a deep understanding of their specific circumstances requires discipline in all marketing communications, from content and blog posts to sales assets and the education of sales and customer success teams.
Risk management, compliance, lawsuit avoidance, and proper reporting are cornerstones of many software solutions. The ability to frame your value propositions in a manner that instills confidence in your current and potential customers is critical to successful messaging. Unless historical trends shift, the importance of managing risk, compliance, and legal liability will increase for most organizations, especially those with substantial assets (i.e., “deep pockets”).
Understanding the specific problems that your solution can help prevent is important to all marketing communications. Being able to tie those specific threats to broader concepts of risk, compliance, and liability allows you to develop and maintain credibility at all stages of the funnel. Additionally, being able to speak to these matters with authority and precision is a transferable skill that will be applicable in new companies and roles. Knowing how to distinguish between risk, compliance, and liability will make you a more effective writer and marketer, no matter what industries and functional areas your work places you in.
Like what you’re reading? Get it sent to your inbox.
🔥 weekly emails
Leave a Reply