Here’s why your organization needs Compliance Risk Assessment
Compliance has become a very critical part of every organization's strategic plan whether its Financial services, banking or healthcare — all companies, beyond a certain volume, face a large number of compliance rules.
Penalties for violating such compliance requirements can be massive, and non-compliance is practically an invitation to authorities, resulting in not only financial loss but also a reputational loss to the organizations.
Whether a company is into manufacturing sector or is into the service industry, one cannot design a compliance plan unless they recognize the current state of affairs. And, for that purpose, one is required to perform a detailed and well-organized assessment of compliance status.
At ASC, we start our compliance risk assessment engagements by clearly defining the objectives of such an assessment. “Compliance Risk Assessments are generally performed-
- to identify the scope of compliance activities throughout the organization;
- to assess the overall effectiveness of the organization’s compliance program and
- to rate the extent to which an organization’s culture is conducive to compliance activities.
A thorough Compliance Risk assessment gives the organization an idea of its compliance program’s strengths, weaknesses, and areas in which it can improve.
At ASC, we have developed a step-wise approach that we adopt to perform such sort of engagements. For any assessment to be successful, one must start from scratch whereby a team of experts first understand compliance framework and review basic documents of the organization. Some of the relevant documents that typically are collected and studied during an assessment include:
Conducting Gap Analysis
- Organizational charts of executive leadership and the compliance Team.
- Policies and procedures related to the compliance.
- Records of employee compliance training exercises and samples of communications made to employees about compliance code of conduct.
- Sample reports of Compliance Trackers and work plans.
- Previous compliance program assessments.
One of the most critical steps in the Compliance Risk Assessment is - performing a Gap Analysis. Gap Analysis shall show where the organization is standing in a compliance program and what steps should it take to ensure complete adherence. A comprehensive gap analysis will reveal the current status-quo of compliance program trends within the organization, that will include program strengths and areas for improvement. In addition, recommendations to the organization based on best practices observed in leading organizations that are of a similar size and structure to the one being assessed shall also be made.
Ultimately, all output of the assessment is codified in a final report that defines what is good and recommends specific improvements.
Benefits of Compliance Risk Assessment
The compliance risk assessment shall assist the organization to understand the full array of its risk exposure, including the possibility that a risk event may occur, the reasons due to which it may occur, and the potential severity of its effect.
An effectively designed compliance risk assessment also helps organizations prioritize risks, map these risks to the applicable risk owners, and effectively assign resources to mitigate the risk.
Remediation Plan: Addressing Areas of Improvement
Compliance risk assessment document is an actionable document which also prioritizes risks and indicates how they should they be remediated. It should be ensured that the output of the risk assessment can be used in operational planning to allocate resources and that it can also serve as the starting point for testing and monitoring programs. Basically, a compliance risk assessment is a live document in which potential severity of the risk changes upon allocation of the resource to mitigate or remediate the risk. Effective compliance risk assessment strives to ensure a consistent approach that continues to be implemented over the years.
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