The Importance of Compliance Risk Assessments

In a world that’s literally had to define a new normal, standards and rules around safety and quality have been scrutinized more than ever before. And that new reality is affecting standard operations for some industries.

While the importance of compliance has not changed, the complexity of it may have. Considering how quickly we continue advancing, this increasing complexity may also be part of our new normal. If you’ve not updated your compliance management lately, now may be a good time.

Compliance management is a broader subject with a lot of moving parts. Two critical pieces of it are compliance audits and compliance risk assessments. The audits measure how well your compliance management is working to maintain compliance, whereas an assessment is a more of a front-end analysis of potential risks. 

We’re here to help you better understand compliance risks and how to perform a thorough assessment for solid compliance management. 

What Is Compliance Risk?

Compliance risk describes the negative implications that the organization may be exposed to if it does not fully comply with required standards.

In other words, there may be legal or financial penalties in the event that a company violates internal or external regulations, laws, or standards. Since certain penalties could devastate a company, compliance demands your full attention. It’s not uncommon for companies in regulated industries to dedicate a person or team to focus solely on compliance.

Compliance Risk Examples

So what kinds of risks are you looking for? There are several types of compliance risks that you may need to consider for an assessment. Six very common ones include:

1. Quality Risks

Safety recalls make quality risks perhaps the most visible to the public. The quality of your product or service has to meet industry and/or legal standards that protect the safety of the consumer. 

2. Process Risks

Process risks describe deviations from operational procedures and practices. These practices can be about anything from remotely accessing a network to 21 CFR Part 11 compliance. 

3. Data Management Risks

A lot of data is protected by regulations, including financial, medical, and other personal information. Depending on whom you serve, you may be held to foreign standards, too, like companies outside the EU that must comply with General Data Protection Regulation (GDPR) 

4. Workplace Health and Safety Risks

These describe processes upholding laws that entities like OSHA sets forth to protect employees.

5. Environment Risks

These are risks that violate rules and regulations set by the Environmental Protection Agency.

6. Corruption Risks

Corrupt practices such as bribery or fraud are the responsibility of the organization to prevent. This may not only apply to employees, but also third parties if you’re aware they are highly likely to engage in corruption.

Compliance Risk Assessment Steps

Once you know where to look for compliance risks, the next logical step is to formalize a process to identify and prevent them. Much like requirements gathering, it’s important to capture everything in a compliance risk assessment document. Let’s walk through some steps that will help you do just that:

1. Outline the Applicable Risks

Since your project requirements are based in part on legal, regulatory, and company standards, it should be easy to identify the kind of compliance rules you’re bound to.  Knowing that and the types of compliance risks listed above, you want to identify all risks you need to mitigate. 

This step gives you a very good high-level frame. The next steps would be subjected to that.

2. Review the Controls Currently in Place to Detect, Prevent, and Correct Risks

Look at what you are already doing to protect against compliance risks. How effective are the controls? Do they need improvement? Do they cover all the risks you identified in step 1? You don’t have to reinvent the wheel; start with what you have and build on that.

It is important to make sure that the outcomes of this step are not driven by resource constraints. You have to focus on the ideal state and cover all related aspects. Don’t list only the actions you can conduct with the current resources you have; raise a flag or make sure that any potential risk is identified ahead of the curve by listing it first.

3. Prioritize the Risks and Necessary Controls

Unfortunately, you may not be able to completely mitigate every single compliance risk. And some compliance concerns will be greater than others. Prioritization can help.

Use a spreadsheet or automated tool to lists the risks (column 1) and assign each a priority (column 2) — many companies use a scale of 1-3 or 1-5 that cover a range of low, moderate, and severe.  Rate your existing risk controls for each (column 3) — for example, “fair,” “satisfactory,” or “unsatisfactory.” Depending on your situation, it might make sense to include a fourth column that defines the residual risk, or how you prioritize the risk after factoring in the existing control. 

Prioritizing risks will provide direction in your compliance management plan. Use what makes sense for your teams as this isn’t typically required at a regulatory level. 

4. Periodically Review and Update the Compliance Risk Assessment

Change happens all the time – to companies, industries, customers, and regulations. It’s important that your risk assessment remain up-to-date or it won’t give you the protection it’s intended for.
 

Tying Your Compliance Risk Assessment to Your Compliance Management Program

Being thorough and well-organized will certainly help you succeed with your compliance risk assessment. But as you well know, it’s only one part of an overarching, very important compliance management plan. 

You save tremendous time and effort by thinking about compliance as part of the whole project. In other words, don’t make planning, assessing, and auditing separate from each other or even from the product development lifecycle. Keep your information as together as possible, as accessible as possible, and always know where the most current version lives. 

But if you really want a gold star for compliance management, make everything traceable. The best way to accomplish this efficiently is with an automated tool. Your compliance audits will take a fraction of the time manual traceability does. Regardless of the automated tool you choose, make sure that you’re able to check off the abovementioned minimal capabilities to ensure your compliance risk assessment.

Ensure Traceability With Perforce ALM

Perforce ALM (formerly Helix ALM) is one of the most configurable traceability tools in the market. It works the way you do and does not require you to change the mode of your operation. It has out-of-the-box integrations with various popular dev tools. And its end-to-end traceability is what most enterprises and regulated industry organizations love about it. 

No matter the industry or regulation standards you must comply with, set yourself up for success by streamlining the process best you can — as compliance is a front, middle, and end-of-development process that’s tough enough without excess steps. 

See why we are so passionate about Perforce ALM and helping more customers be successful in their lifecycle management journey. Grab a free 30-day trial to check it out or watch the demo recording below.

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