My Wallet Ltd. (MWL) is a Payment Bank, licensed from the Regulator. In order to provide the UPI services to the common man, it adopted intensive marketing and opened accounts in good numbers by compromising the Know You

From the given facts, the MWL has initially faced the Compliance Risk . Compliance Risk arises on account of non-compliance or breach of laws/ regulations which the entity is supposed to adhere. It may result in deterioration of reputation in public eye, monetary penalty and other penal provisions. Initially MWL did not comply with the regulatory norms and was facing the compliance risk. When the regulator imposed fine and terminated the license for the UPI services the people started gathering in the branches to get their money back, due to bad news being circulated in the society, which is called as the Reputation Risk . This type of risk arises from the negative public opinion. Such type of risk may arise from e.g. from the failure to assess and control compliance risk and can result in harm to existing or potential business relationships. Compliance risk and reputation risk are co-related as compliance risk leads to reputation risk. As seen in the above case, a non-compliant company not only runs the Compliance Risk but it is also prone to reputation risk as public today is very vigilant and news spread fast and far and wide. Thus, compliance risk and reputation risk are interlinked.