The world of compliance risk management is in a constant state of change. Because of this, organizations continuously struggle to ensure that their business operations are compliant not only with governmental regulations but also with ethical values. With this in mind, it seems that compliance teams worldwide are constantly playing catch up in determining what business units, departments, and processes are prone to compliance failures and which are not. Being behind on this process can be extremely dangerous to the organization as compliance failure can lead to a plethora of fines, setbacks, and a diminishing reputation among customers. It would seem to many compliance teams that nothing short of the ability to predict the future is suitable enough to identify and prevent emerging risks effectively. A compliance risks analysis may be able to give organizations exactly what they need to build a robust compliance program better and better mitigate the potential of emerging risk.
Creating an Effective Compliance Risk Analysis Framework
Before we begin discussing how to create an effective compliance risk analysis it is important first to understand exactly what a compliance risk is and where these risks might emerge from. Compliance is the organization’s attempt at establishing policies and procedures that adhere to government regulation as well as ethical values described throughout the organization’s code of conduct. Compliance risk emerges when the organization’s processes do not effectively adhere to the standards stated previously.
What is Compliance Risk?
Different organizations face different compliance risks, all of which can be dangerous and result in fines, imprisonment, or damage to reputation. These risks can emerge in various areas, with some organizations being more susceptible to certain risks than others. Common areas where compliance risks arise include but are not limited to:
● Anti-bribery and corruption
● Anti-money laundering acts
● Data protection and cybersecurity laws
● Labor laws
● Cartel and competition laws
● Bookkeeping and accounting regulations
● Export control
● Environmental law
● Financial Regulation
To ensure an effective compliance risk analysis process, organizations must first identify the areas most applicable to their operations. This helps determine which areas are most susceptible to emerging compliance risks and allocate resources accordingly. Once identified, the organization can begin the compliance risk analysis process. Know more about compliance risk mitigations and their importance
Compliance Risk Analysis: When And How Should It Be Done?
When organizations re-evaluate their compliance program, the first step should be to conduct a compliance risk analysis. The analysis outlines the framework for developing, implementing, and managing policies and procedures tailored to the organization’s areas of high risk.
With the information gathered from an effectively executed compliance risk analysis, organizations will be better equipped to allocate resources and better-set priorities for mitigating risks. Unfortunately, oftentimes organizations first implement their efforts of compliance programs long before they undergo a compliance risk assessment.
Organizations may miss crucial risk areas and become more vulnerable to compliance violations without a complete compliance risk assessment. Conducting the assessment itself can serve as evidence of identifying compliance risks and implementing relevant countermeasures, mitigating the negative impact of a compliance violation on the organization.
Implementing an Effective Compliance Risk Analysis Framework
Non-profit organizations deal with ever-evolving compliance requirements across various areas, creating a changing risk landscape. To manage these risks, they need an integrated and flexible compliance program based on a common information architecture and framework. Coordinated risk management across departments enables informed decision-making.
Agile technology and information architecture are critical for compliance automation. Effective compliance architecture and framework require back-end management and oversight to ensure organizational continuity. It also engages employees and stakeholders, informing them of their roles and responsibilities in ensuring compliance.
Continued Monitoring of Compliance Risks
Once an effective compliance risk analysis framework is in place, the organization should determine the areas of compliance that pose the highest risk and develop strategies to combat or mitigate them. However, the work doesn’t end there. If the identified compliance risks are not continually monitored, the organization will revert to its initial state of having unidentified risks and no means to prevent them. Compliance risks, like all risks, are constantly changing.
To ensure an effective and agile compliance program, organizations must continuously re-evaluate it. Regular monitoring and assessment of compliance risks enable evaluation of the efficiency of existing controls, identification of emerging risks, and allocation of resources for effective compliance. This approach also demonstrates the strength of the compliance program to auditors and law enforcement.
Organizations should adopt an integrated, agile, and collaborative compliance program, such as VComply, built on a common information architecture and framework. VComply’s system and compliance architecture facilitate coordinated compliance, risk management, and assessment activities across different departments and functions, breaking silos and enabling informed decision-making.
