It isn't a compound word, but it's a derived word historically. The parts are om + råd + e
om is like in the preposition om, 'about' or 'around'
råd is like in the verb råda meaning something like 'reign' or 'rule over', although today it's more often used to mean 'advise'.
So område is literally 'something reigned' or 'something someone can make decisions about'.