Compliance risk assessment is a procedure that identifies the major inherent risks within a business line, factors in any processes and procedures that are practiced by the institutions to control and mitigate those.
Compliance professionals must understand what a compliance risk assessment is and how to do it. A flawed risk assessment process means that a company doesn’t understand the actual risks it faces and nothing good comes from that flawed assessment can lead to bad business decisions, reputation harm, and other problems.
Thus, in simple words, we can say that a risk assessment identifies potential hazards and analyzes what would happen if that hazard occurs. A business might perform risk assessments on everything from a data breach to the failure of critical IT systems, to natural disasters, to poor financial reporting. Compliance officers can narrow their focus a bit more than that. Now let’s understand its procedure or the steps of compliance risk assessment:
Ø Monitoring changes.
Firstly, a company needs to monitor regulatory changes. Companies need to know the change in any law that affects the company’s business. These laws can be sometimes a big challenge for some organizations. Whether you rely on local advisory firms to provide updates or use an automated service, the company needs to know the applicable laws, rules, and regulation changes
Ø Assessing impact.
You need to know how the new regulations can change your business or its effects. Sometimes new regulations will require your company to report something like additional data about employees and pay equity.
Ø Determining how to meet expectations.
You now need to determine how well your company can meet those expectations. The important point here is that you are sure that the answer is accurate. You need to know that whether your diligence capability is weak, as it is better than to believe your capability is strong and be mistaken about that.
Ø Developing a plan to improve.
Develop a plan to improve any weakness in your business processes, to fulfill what the regulations require. You need to improve internal business processes to gather accurate information and file that report.
A successful risk assessment is also about knowing when and how the company’s own business processes or objectives change. They can be just as urgent and difficult to remediate as any changes in risk that come from outside the company. For example- if your company expands business into a new country, it might face new anti-corruption or data privacy risks. In such cases, all the rules and regulations are the same but your company changes, and that triggers a change in its risks which should lead to a new risk assessment.
CONCLUSION- The purpose of risk assessment is to assist decision making, determining the risks to be treated, and priority to implement the treatment. The need for compliance risk assessments is increasing because of the pace of change in the business environment whether the change comes from outside or within the organization. These changes are getting faster day to day which means compliance needs to be more adept at risk assessments, compliance officers are knowledgeable in how assessments should work thus an accurate compliance risk assessment is the most important thing a compliance officer might do.