Compliance Risk Assessments

July 16, 2018

Compliance risk assessments are vital to maintaining compliance with regulatory requirements. Failing to comply with regulations—and getting caught—can be brutal for an organization, resulting in fines and penalties. To avoid this, regular compliance risk assessments are necessary to identify inherent risks within the organization and devise a plan to mitigate those risks.

A Different Kind of Assessment

A compliance risk assessment varies from other types of risk assessment. For example, it looks less at financial statement risks, like those in internal audit risk assessments, and strategic risks, like those in enterprise risk assessments. Instead, a compliance risk assessment focuses largely on legal and policy noncompliance, or ethical misconduct.

To perform an effective compliance risk assessment, ensure that the performer fully understands the regulations for your industry. If necessary, don’t hesitate to outsource this important job or create a new position within the organization to manage compliance risk assessments.

Special Considerations

A quality compliance risk assessment relies on a strong framework with clear, organized risk domains. Note that compliance risk isn’t a reflection of an individual’s or team’s performance—it’s a thorough understanding of the service and products offered and the processes used. Regardless of the team in charge, certain organizations or service lines are more likely to face a compliance regulation issue. Each of these comes with its own set of inherent risks, and understanding those risks is vital to creating a plan to mitigate them.

First, risks must be identified. Each risk must then be prioritized by determining the impact level should a potential regulation mistake occur. These impacts could include fines, penalties, or reputation damage.

Knowledge of the potential implications of each risk will allow your organization to effectively prioritize risks and create a mitigation plan for each inherent risk.

Compliance 101

An effective compliance risk assessment will allow you to allocate resources to effectively mitigate the inherent risks present within your organization. Here’s how to use your assessment well:

> Establish ownership. Make it clear who is responsible for managing each risk and explain the tools available to them.

> Make it actionable. Ensure that the compliance risk assessment establishes clear steps to mitigate inherent risk.

> Keep it alive. Treat the assessment as a living document that can shift and change as regulations and the organization grows and changes.

> Repeat and recycle. Perform a compliance risk assessment periodically, and don’t hesitate to shift your approach to risk management.