5 Steps for Better Compliance Risk Assessments

Compliance plans are required to be tailored to an organization's specific threats and vulnerabilities. Most regulators (and most modern corporate compliance programs) mandate RCSA, which is a common approach. However, prescribing is one thing; implementing is another.

The following are the five keys to a successful compliance risk assessment that we've learned from working with dozens of large corporations:

1. Identify and quantify the broadest possible range of hazards. 

There is no one-size-fits-all approach to risk management. And the sheer size of the potential issues can be daunting at times. When casting a wide net, it is essential. Don't succumb to cognitive illusions like confirmation bias. Consider the wide variety of elements that affect your risk, including business activities, market pressures, regulatory landscape, geographic locations, reliance on third parties, possible clients and business partners, and the categories of data held and transferred by the organization. 

Risks can be graded and ranked in severity once they are discovered. Cybersecurity dangers for a corporation that maintains personal information about its customers (such as biographic, financial, or medical data). However, the level of risk depends on various factors, including the amount, substance, and methods used to gather and maintain the data. After the event, some of the most severe hazards are discovered. "Prospective hindsight" can be gained by undertaking a legal "pre-mortem" to identify emerging risks.

2. Determine the repercussions. 

The regulatory and enforcement environment determines the potential implications for your company. Regulators and enforcement agencies from various jurisdictions are involved in many risk operations. In the absence of regulation, dangerous behavior may lead to a private lawsuit. Private rights of action can be created in some regulatory regimes, bringing public and personal repercussions. Regulations governing the protection of customer data, such as the Securities and Exchange Commission's (SEC) requirements for publicly traded companies and the New York State Department of Financial Services (DFS) requirements for licensed financial institutions, may take civil enforcement actions against organizations that fail to take reasonable steps to protect customer data. Federal or state law enforcement agencies may potentially use a breach to begin an inquiry into possible criminal insider trading. Finally, if sensitive consumer data is exposed or stolen, the corporation may face individual or class action lawsuits 

Effective risk management demands an in-depth understanding of the regulatory environment. 

3. Assign responsibility 

Another essential to a practical risk assessment is assigning responsibility for the risks. The two types of risk owners are those responsible for creating the risk and those responsible for managing the risk. Your risk management strategy should take into account both aspects. When it comes to phishing scams, any employee with an official company email address is fair game. Employees are expected to exercise reasonable diligence and care when opening and replying to emails. On the other hand, a company's management makes sure its personnel is adequately prepared to spot and report email fraud. IT (Information Technology) people and technology must also be maintained by management to detect and combat such scams in advance. The board also has obligations to ensure that adequate controls, resources, and testing are in place.

4. Controls should be matched to the risks 

There is no limit to the number of ways to reduce your risk exposure. Policies, training, alert systems, compliance staffing, audits, and direct board monitoring are all part of the process. A limited amount of money can be allocated for compliance. This means that you may have to go outside the box when implementing restrictions. Effective control is "reasonably constructed" to deal with the danger. However, the control’s mitigating value must be correctly matched to the risk's severity. It will have a limited impact on high-risk activities such as data collection and storage, even if the corporation promises to take all necessary measures to protect sensitive data. Plan to handle any risk that you've identified that doesn't have a mitigating action in place. Some newly identified hazards may necessitate a more thorough examination, including a look back to establish the degree of any harm that the gap may have caused. This may require legal advice to