The ever-changing nature of compliance risks underscores the importance of effective risk management.
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The compliance risk environment faces environmental shifts
The compliance risk environment is rapidly changing. Regulatory, legal and governmental uncertainty, geopolitical risk, AI use and increased regulatory requirements are all putting pressure on compliance to both demonstrate its value and manage new-in-kind risks. To cost-efficiently help the business navigate the moment and ensure efficient delivery of risk management, corporate compliance must build four key capabilities.
Manage compliance risks with these key capabilities
To navigate the complexities of the compliance risk environment, focus on coordinating across existing risk management functions and efforts. Make building four key capabilities a priority, and you’ll be well on your way to enabling faster, more informed decision making and improved risk management.
Go from an inconsistent risk posture across the organization to an operationalized risk appetite
Legal advice can become overly conservative when risk appetite is unclear or poorly communicated across stakeholder groups. Mitigate this by developing a codified process to operationalize risk appetite (for example, using playbooks, repositories and risk scorecards) to ensure consistent application across the business. Talk to your peers in other business and risk functions, and learn from how they describe risk appetite and convey it to their teams.
Improve quality compliance standards to ensure business partners are aware of and prioritize risk guidance
Employees can struggle with an increasing number of compliance obligations. Quality compliance standards — a set of documented principles, specifications, guidelines or characteristics that are consistently used to guide the design, development, execution, monitoring and improvement of compliance activities — help promote compliant behavior and reduce compliance risks within organizations.
These standards also help monitor compliance effectiveness over time. Develop a structured methodology to evaluate risk management policies and procedures using predefined quality standards.
Cross-functional data governance combats inconsistent disclosure requirements
To comply with new compliance reporting requirements in cybersecurity, ESG (environmental, social and governance) and AI, legal leaders are tasked with collecting and reporting on new metrics, many of which are inconsistently stored across the business and third-party networks.
Data governance frameworks specify ownership, processes, decision rights and accountability to manage, protect and leverage data assets. They also facilitate transparency and quick collaboration across functions — enabling consistent data storage, tracking and reporting practices across the business, all of which are key to efficient, productive compliance.
Strategic risk management supports risk taking for business growth
High-growth companies take aggressive risks and allocate capital quickly. Global uncertainty and a complex decision-making environment, however, may make executive leaders more hesitant to take risks.
When practiced during significant business initiatives such as acquisitions, geographic expansions and substantial investments, strategic risk management makes organizations more likely to achieve their goals, manage current risks and take future risks. The key aspects of strategic risk management are:
Coordinated risk and assurance across risk management functions to remove execution barriers and reduce drag on business initiative completion
Strategic focus highlighting where the organization is best positioned to take risk with positive upside while still aligning to risk appetite
Adaptive, to focus on barriers to achieving initiative success and adjust support as material conditions change throughout the life cycle of an initiative.
Compliance risks FAQs
How do you mitigate compliance risks?
To mitigate compliance risks, work with cross-functional stakeholders to identify the metrics needed to meet regulatory requirements and establish standardized data governance processes. Evaluate and strengthen existing third-party risk management practices. Translate high-level risk appetite statements into jargon-free, action-oriented risk appetite guidance to better align employee behavior with desired thresholds. Finally, work with relevant stakeholders to identify high-priority risks and agree on common risk processes, risk-rating scales and metrics.
How do you fix compliance issues?
To fix compliance issues, build organizational capabilities that enable speedier and more informed decision making and risk management. It can be helpful to standardize risk appetite across business functions; develop guidance for implementing and monitoring risk policies; clarify role and responsibility definitions that enable appropriate data asset tracking, storage, reporting and utility; and emphasize removing obstacles to achieving objectives across business initiatives.
What are quality compliance standards?
Quality compliance standards are a set of documented principles, specifications, guidelines or characteristics consistently used to guide the design, development, execution, monitoring and improvement of compliance activities. These standards are meant to ensure that compliance activities effectively promote understanding of compliance obligations, reduce the effort required for employees to comply and highlight the personal value of compliance to staff.
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