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 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 non-compliance or ethical misconduct.
To perform an effective compliance risk assessment, ensure that the performer fully understands the regulations for your industry.
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 services and products offered and the processes used.
An effective compliance risk assessment will allow you to allocate resources to effectively mitigate the inherent risks present within your organization.
JURCOM’s approach to risk assessment:
- 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.
- Monitor and report. Internal controls need to be monitored by staff and managers on an on-going basis to ensure policies are being followed and procedures are working as intended. Depending on the level of risks identified during the risk assessment, risk remediation and risk monitoring and auditing process, the organization’s Board members and executives may need to be informed.
- Repeat and recycle. Perform a compliance risk assessment periodically and don’t hesitate to shift your approach to risk management.