Compliance Risk Assessment: What is it and how to conduct?

Risk and compliance programs are evolving. The number of “mature and advanced” risk and compliance programs increased to 53% in 2023 from 38% in 2022: Navex 2023 Risk and Compliance Report. This indicates that organizations are increasingly recognizing the importance of managing compliance risks.

Compliance risks are characterized as possible harm or negative repercussions of failing to comply with legal, regulatory, or industry norms. Non-compliance impacts businesses in different ways such as large penalties, loss of business prospects, loss of reputation, and legal problems.

A common misconception is that compliance issues originate and end in cybersecurity. In reality, multiple functions within the business contribute to it. Lack of visibility, inadequate staff training, lax policies and procedures, and resource constraints have often been identified as root causes of non-compliance. It is important for businesses to recognize and manage compliance risks at early stages to minimize impact.

In this article, we dive deep into compliance risk assessment, get an overview of how it is done, and also give insights into how compliance automation can be used to achieve corporate compliance risk assessment goals.

What is Compliance Risk Assessment?

A compliance risk assessment is a methodical procedure for discovering, evaluating, and ranking legal and regulatory risks that could harm the organization. It enables the organization to concentrate crucial resources on the most significant hazards and areas missing sufficient controls.

Performing rigorous risk assessments is deeply ingrained in every compliance guideline of compliance regulations and security frameworks. (Check out: Guide to compliance management)

Why do you need to conduct a Compliance Risk Assessment?

A compliance risk assessment process helps uncover potential risks that can bring regulatory scrutiny or attract legal actions and penalties. It is a part of the broader risk management strategy and a way to encourage continuous improvement.

Here’s why you need to conduct a compliance risk assessment:

• It is a proactive approach to managing compliance risks and ensuring the implementation of a  robust corporate compliance program
• The assessment helps identify inadequacies in current risk management and compliance processes
• Compliance risk assessments help build a security conscious and compliance culture by enhancing stakeholder participation.
• The assessments save organizations from the financial burdens of data breaches and increase cost-effectiveness in the long run.

Importance of Compliance Risk Assessment

Compliance Risk Assessment helps businesses identify and deploy patchwork on instances that could render them non-compliant if left unchecked.

Compliance risk assessment requires organizations to align their current cybersecurity policies, methods, and controls with compliance requirements. It identifies gaps and recommends implementation plans to maintain an effective compliance posture. 

Here are two ways you can use risk assessment to help achieve/remain compliant:

Identifies risks

The risk assessment process identifies existing vulnerabilities and projects future risks that could affect a business’s security posture. An effective risk assessment determines the impact of individual risks identified and prioritizes patchwork implementation based on the level of risk.

This assessment offers businesses a chance to evaluate current policies, practices, and controls and assess their performance. Backed by this information, gap-remediation measures are implemented.

Ensures compliance

A compliance risk assessment reviews an organization’s current cybersecurity protocols, processes, controls, and norms and identifies the missing elements required to achieve compliance.

Non-compliance causes reputational damage, monetary penalties, impacts sales pipelines, and legal repercussions.

With Sprinto you can easily scope out compliance gaps and implement air-tight controls to achieve audit readiness in weeks. Sprinto has integrated risk management to help you manage risks unique to your business.

Implement error-free compliance risk assessment with Sprinto

How to conduct a Compliance Risk Assessment?

In order to conduct a compliance risk assessment, organizations must identify possible non-compliance areas, evaluate the likelihood and impact of non-compliance, rank risks, and create risk management plans by conducting a complete compliance risk assessment. 

The 5 steps to conduct a compliance risk assessment are:

1. Identifying the risks
2. Assessing the outcomes of non-compliance
3. Prioritizing major risks and developing mitigation strategies
4. Implementing strategies and validating results
5.  Monitor and review your controls

Here are the steps involved in conducting a compliance risk assessment in detail:

1. Identifying the risks

Understand the compliance requirements applicable to the business and document the business functions that must adhere to them. In order to identify various types of compliance risks, you must:

• Find out business units/areas that are subject to stringent regulations and carry significant risks
• Conduct internal audits and assessments to pinpoint gaps based on compliance objectives
• Analyze historical data and previous cybersecurity incidents
• Utilize customer complaints and employee feedback for deeper insights
• Assess third-party and fourth-party compliance
• Compare performance against peers and industry standards
• Consult with legal/compliance expert for compliance concerns

How can Sprinto help here? 

Sprinto has a pre-built risk library that contains most risks encountered by tech companies today. Simply choose the risks that apply or add custom risks and make assessments easier.

2. Assessing the outcomes of non-compliance

Map risks to consequences and affected parties to analyze the impact. You can utilize a risk matrix here. Assessing the outcomes is crucial for developing a risk mitigation plan based on severity. It also helps allocate the right resources towards the corrective action plan. Lastly, you can communicate about the risks to the affected parties and establish transparency.

Sprinto automatically displays impact and likelihood scores to remove the unambiguity from assessments.

Step 3: Prioritizing major risks and developing mitigation strategies

Prioritize the risks and decide which ones demand immediate attention based on the impact assessment.

This may require creating new policies, processes, setting up training programs, or installing  new technology tools

Doing all of this might be a little overwhelming, but it ensures that your pre-breach and post-breach mechanisms are on point.

With Sprinto you can assign risk owners and accept, reject or transfer risks and adjust depth of mitigating actions.

Step 4: Implementing strategies and validate results

Implement steps based on your earlier learnings. Before moving on to the next risk, validating the effectiveness of your controls is a critical next step. Examine those findings and assess if the control is functioning as intended. If not, find out why and, if required, apply more or better controls to achieve the desired output.

Step 5: Monitor and review your controls

Review your risk management protocols and periodically review their performance.  Compare your current scores with your previous scores and identify avenues that are underperforming and deploy improvement measures. These efforts contribute to enhancing your compliance program.

Launch automated checks with Sprinto and get timely alerts for any anomalies to ensure proactive response.

Also read: Importance of compliance management system

How to develop a compliance risk assessment plan?

A compliance risk assessment work plan is created after the identification and prioritization of potential compliance risks. It includes activities that will help close gaps in compliance and help the organization continuously improve.

The compliance risk assessment work plan includes the following activities:

Policy and procedures updates

The compliance gap analysis lays the foundation for new initiatives that must be taken and old processes that must be updated. These in turn translate into policy and procedure updates as a part of the work plan. The changes must be communicated to the stakeholders to ensure awareness and transparency.

Deploying the required technology

These can include deploying a range of solutions for compliance risk management such as data analytics tools, endpoint management tools, incident management software and more. You can also opt for a comprehensive compliance automation tool such as Sprinto that gives you access to these security tools without any extra costs.

Arranging for workforce training

Ensure work plan success by equipping your teams with the right knowledge and skills. Arrange for security training and employee risk awareness programs to help them understand regulatory requirements, compliance and security risks and the right measures to build a mature security program

If you choose to implement a compliance program with Sprinto you get access to training modules aligned with compliance frameworks.

Establishing monitoring mechanisms

Ongoing monitoring is the key to ensuring you are ever-compliant. Involve the tech team in setting up a mechanism to monitor key compliance indicators and other performance metrics. This is necessary for initiating proactive actions whenever there is a slight deviation.

Want to know how Sprinto ensures 24×7 monitoring of controls? See Sprinto in action

Finalizing audit projects

Set up a review period for internal audits to gauge the effectiveness of internal controls that have been implemented. Keep iterating for continuous improvement and once you reach > 90% mark, you are ready for an independent audit to bag your compliance certification.

What is a compliance risk matrix?

A compliance risk matrix is a visual representation of compliance risks that assists with risk prioritization based on severity and potential impact. It usually follows a grid style and helps identify high, medium, low and negligible risks.

Here’s a example of compliance risk matrix:

What does a compliance risk assessment framework include?

A compliance risk assessment framework is a structured approach to create an inventory of applicable compliance laws and identifying the corresponding risks to strengthen controls.

The primary goal is to avoid penalties, fines and negative publicity attached with compliance failures.

Compliance risk assessment framework includes:

• Identifying relevant regulatory obligations and the attached risks
• Ranking risks on the basis of likelihood and impact
• Determine the adequacy of internal controls and compliance gaps
• Develop strategies for risk mitigation
• Conduct regular internal audits for monitoring and improvement

To ensure the success of compliance risk assessment framework

• Stay updated with regulatory requirements
• Leverage the guided approach from frameworks like COSO (Committee of sponsoring organizations) to apply and strengthen internal controls and manage enterprise risks.
• Implement continuous control monitoring mechanisms
• Use compliance automation tools such as Sprinto for comprehensive compliance risk management

How can Sprinto expedite compliance risk assessment?

Performing a compliance assessment is critical to detect, prioritize, and manage any compliance risks that could impact their operations, reputation, and legal standing. Doing this manually, however, can be a daunting task. A lot of engineering and security resources are spent on these processes. That’s where compliance automation tools like Sprinto step in.

Sprinto’s compliance program is built to enable automation at every step of the way. 

• The enhanced risk register gives a quick snapshot of inherent risks associated with relevant risks, number of controls mapped and the residual risk attached.
• Risk quantification makes it easy to understand the severity and impact 
• Details about risk owners help establish accountability and risk treatment strategies assist with the action plan ahead.
• You can get a bird’s eye view of the risk profile and focus on high-risk areas
• The reporting dashboard shows passing and failing checks to showcase real-time compliance status

You can also expand the scope of your compliance program with in-built policy templates, training modules, baked-in tools such as Dr Sprinto (mobile device management), automated evidence collection and more.

Talk to a compliance expert today and strengthen your risk and compliance program.

To Wrap It All Up

Performing a compliance assessment is critical to detect, prioritize, and manage any compliance risks that could impact their operations, reputation, and legal standing. 

Businesses can develop a thorough compliance risk assessment program that identifies and prioritizes risks, creates mitigation plans, puts them into practice, and routinely monitors and reviews them. Doing this manually can be a daunting task. A lot of engineering and security resources are spent on these processes.

Risk Assessment: The Sprinto Way

Sprinto’s compliance program is built to enable automation at every step of the way. Our integrated risk assessment model automatically maps action items to process owners and notifies them every time a risk is identified. A centralized dashboard gives organizations instant visibility on their compliance tasks and notifies process owners whenever efficiency metrics are not in the desired range.

FAQs

What is compliance risk assessment methodology

Compliance risk assessment methodology evaluates, prioritizes and mitigates risks relegated to regulatory requirements. The methodology involves understanding of applicable compliance laws and assessing risks such as data privacy infringement, access mismanagement etc.

What is compliance assessment?

A compliance assessment is the process of evaluating a company’s adherence to regulatory requirements, its ability to eliminate risks related to security controls, and its alignment with governing policies and procedures. Overall, it gauges the organization’s commitment to meeting industry standards.

Why conduct a compliance risk assessment?

Conducting compliance Risk Assessment assists businesses in identifying and reducing any risks that can result in a breach of laws and standards, including HIPAA, GDPR, PCI-DSS, etc. Not just that, compliance risk assessment helps you to build a good cybersecurity posture, avoid cyberattacks and even loss of reputation.

What is the 5 step process of risk assessment?

The 5 step process of risk assessment includes identifying the risks, assessing the outcomes of non-compliance, prioritizing major risks, implementing the risk mitigation strategies, and monitoring the protocols in place.

Who is responsible for compliance risk assessment?

It varies vastly depending on the company, but generally, a compliance manager or a cybersecurity expert looks into compliance management. However, it involves all the teams in a company to ensure there is no entry point for any cyber threats.