Reevaluating compliance risk assessments in today’s world

Reevaluating compliance risk assessments in today’s world

Five considerations for demonstrating awareness of your evolving risk profile and for preventing and detecting issues

There is perhaps no better time to reevaluate and refresh your organization’s approach to conducting risk assessments than following a black swan event.  These rare but impactful events will reveal risks attendant to your business that warrant closer consideration in your assessment process. This is not to suggest that prior risk assessments need to be discarded as obsolete but rather that a process exists, as regulators expect, to meaningfully consider evolving risk, design procedures to detect when risk events occur, and revise processes as new lessons are learned. 

Changes to supply chains, sales channels and pressures, operating models and more have created a new paradigm for risk assessments and the programs designed to monitor risk exposure and red flags.  In some cases, internal controls designed around in-person checks and balances have been modified for a remote workforce, potentially leaving unmitigated gaps. Changes to business models have also resulted in adjustments to how and where companies rely on third parties to act on their behalf. Externally, the pandemic and resultant worldwide downturn has complicated the political risk environment as governments concurrently attempt to contain the outbreak, mitigate its economic impact and assuage the fears and frustrations of increasingly exasperated electorates. To compound matters, corruption risks, including public procurement kickbacks and internal fraud, tend to increase in times of crisis. Some companies may engage in morally reprehensible practices – from insisting that employees go to work despite not implementing the requisite health and safety measures, to paying dividends to shareholders while benefiting from government relief programs – underpinning heightened legal and reputational risks.

Amid all of this, organizations should continue to conduct compliance risk assessments while considering ways to adapt their approaches to fit the current world reality. The consequences of pausing this work could be detrimental in terms of reputational damage or regulatory action down the road.

Risk assessments in today’s world 

The current environment presents obvious challenges to conducting risk assessments: travel restrictions, office closures, employment changes and furloughs, cost-cutting measures and general business uncertainties can impact how companies execute their risk assessment mandates. Given these restrictions – in addition to the changing risks facing companies – the processes, methods, tools and resources employed to assess risks are more important than ever. 

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