Discover everything there is to know about compliance risk management including common methodologies and best practices with this guide from Reciprocity.
In the modern business environment, managing risk is critical for both business continuity and longevity. A robust risk management program can help your organization better predict and respond to risks before those risks cause any damage – and always remember, a cybersecurity incident such as a data breach can be extraordinarily damaging.
Some of the many repercussions associated with cybersecurity incidents include significant financial loss and reputational damage, as well as regulatory and legal consequences. In most cases, the fines and penalties associated with non-compliance dwarf any of the other costs resulting from an incident. In fact, the average cost of a data breach was $4.2 million in 2021 – a painful amount, especially when you consider that the majority goes directly toward paying the fines that come with regulatory and compliance violations.
For many organizations, implementing a compliance risk management program is crucial to keeping all those potential consequences in check.
Compliance risk management (CRM) is a practice used by organizations to help assure compliance with applicable laws, regulations, and standards. The CRM process includes identifying, assessing, and monitoring the risks to your organization’s compliance, as well as reviewing all the internal controls you put in place to assure that your business complies with those obligations, and monitoring those controls to confirm they’re effective on an ongoing basis.
In this article we’ll take a closer look at compliance risk management, including some of the most common compliance risk management methodologies and best practices. Equipped with this information, your organization will be better positioned to establish a compliance risk management program that’s best for your business and your bottom line.
Compliance Risk Management Considerations
To establish an effective compliance risk management program, you’ll need to take an enterprise-wide approach that accounts for the following:
- Training and communication of relevant employees.
- Risk appetite analysis to determine your organization’s acceptable level of risk.
- Policies and procedures for managing compliance risk.
- A risk assessment or risk analysis to identify potential risks and prioritize them:
- A qualitative risk assessment relies on subjective ranking, such as high-, medium-, or low-risk;
- A quantitative risk assessment relies on data and mathematical probabilities to calculate risk.
- Controls testing and monitoring.
- Reporting test results and risk posture status.
- Tools for risk management.
- Governance and oversight.
Ideally, your risk management, compliance, and internal audit functions should all be involved in the CRM process. The most effective compliance risk management program is one that documents the potential losses and liability your organization might face for non-compliance, including legal penalties, fines, business loss, and reputational loss; and then implements necessary remediation measures to keep those risks at acceptable levels.
Common Compliance Risk Management Standards, Frameworks, and Methodologies
While CRM has no specific risk assessment methodology or framework of its own, several risk management frameworks and methodologies exist that can be tailored to address compliance risk specifically, and therefore help your CRM decision-making.
Here are some of the most common CRM standards, frameworks, and methodologies that you should consider when implementing a compliance risk management program:
ISO 27005:2018 Information Technology – Security Techniques – Information Security Risk Management provides a framework and an approach for information security and cybersecurity risk management. This framework offers guidelines for what your risk assessment should include, but no specific steps. Nevertheless, most risk management methodologies are derived from this international standard.
OCTAVE (Operationally Critical Threat, Asset and Vulnerability Evaluation) Allegro Risk Method
Created by the Software Engineering Institute of Carnegie Mellon University, OCTAVE is a qualitative methodology that can be conducted in small groups without disrupting business operations. Here are its steps:
- Develop risk measurement criteria consistent with the organization’s mission, goal objectives, and critical success factors.
- Create a profile for each critical information asset that establishes clear boundaries for the asset, identifies its security requirements, and identifies all of its containers.
- Identify threats to each information asset in the context of its containers.
- Identify and analyze risks to information assets and begin to develop mitigation approaches.
Microsoft Security Assessment Tool
Although also not a methodology, the Microsoft Security Assessment and Planning Toolkit offers “Solution Accelerators” to help IT professionals using Microsoft products target enterprise needs in security and compliance, management and infrastructure, and communications and collaboration.
NIST SP 800-30 Revision 1 – Guide for Conducting Risk Assessments
This National Institute of Standards and Technology special publication discusses risk assessment, analysis, and mitigation, and defines steps for the risk assessment process.
Information Risk Assessment Methodology 2 (IRAM2) and Risk Analysis Workbench Tool
This Information Security Forum provides a step-by-step guide for security risk assessment models. IRAM2 focuses on internal vulnerabilities and their potential impacts on those outside the organization.
Compliance Risk Management Best Practices
Whether you use an existing methodology or start from scratch, there are some best practices when it comes to creating a compliance risk management system that all organizations need to consider.
Start With a Risk Assessment
In any risk management program, one of the most important steps is to conduct a risk assessment. A thorough compliance risk assessment will inform all the other elements that comprise your compliance program: policies, due diligence, and corporate culture.
Unfortunately, there’s no one-size-fits-all approach to conducting a risk assessment. Compliance leaders will need to work with others in the enterprise to understand what the organization’s operating processes are, and how those processes might or might not violate regulatory compliance demands. When all is done, however, a risk assessment will help your organization prioritize risks, which will help you determine which risks to respond to first.
Prioritize Third-Party Risk
Today almost every organization deals with a large number of third parties. Because some of the most prominent compliance risks are associated with third parties, it’s important that you perform at least some level of due diligence on all your vendors.
A strong due diligence process should be a central component of your compliance risk management program. And given the sheer volume of third parties most companies now have, make your organization’s due diligence process as streamlined, integrated, and automated as possible.
Stay Current With Regulations
It’s also important to be aware of any changes to regulations that affect your business. During the risk assessment phase, make sure you understand all the requirements imposed by all applicable laws and regulations; then stay updated with the latest guidance and enforcement policies.
Risk assessments and internal audits can only go so far if you aren’t familiar with the rules your business needs to comply with, or you aren’t aware that those requirements have changed.
Build a Culture of Ethics and Compliance
Always remember that compliance programs are really about managing people. After all, security is a people problem, and humans tend to be the weakest link, especially in cybersecurity.
Start by setting the tone at the top. Your organization’s senior leadership should be able to communicate expectations clearly to middle managers and the rest of the organization about the ethical conduct you want to see from employees. It’s also important that your organization’s decision-makers don’t just set the expectations, but also actually follow those standards themselves.
A great way to assure your organization is focused on building a culture of ethics and compliance is via security awareness training. Including compliance requirements and framework standards as part of your overall security awareness program can help employees better understand not only what your internal policies and processes are, but why those policies are critical for business operations, cybersecurity, and privacy.
Choose Tools to Help
Any risk management program is going to require a huge amount of effort from the organization implementing it. With compliance risk management, there’s the extra burden of staying current with regulatory requirements and changes – a task that can be overwhelming on its own, let alone in conjunction with all the other activities associated with the risk management process.
As your business grows, your compliance efforts will need to evolve alongside it. Risk management in any sense is a continuous process, as opposed to a one-time exercise. To determine whether your policies and procedures are effective, you’ll need to evaluate them on a regular basis. The best way to do this is by choosing a software solution that can help you continuously monitor your compliance efforts, and any changes to the regulatory environment.
Using automation, these tools can also help your organization cut down on the number of mundane tasks associated with the risk management process – tasks that are inevitably wasting your organization’s time and money if they’re not automated. In addition to eliminating these frustrations, automation can also give you greater insight into and control over your data.
Choosing a scalable and flexible compliance management tool can often make the difference between enhancing and impeding your company’s compliance management program. Fortunately, there are solutions designed to help.
Manage Compliance Risks with the Reciprocity ROAR Platform
No matter your organization’s size, it can be difficult to keep up with compliance risk management. As your organization grows, keeping everyone involved in the CRM process on the same page is likely to become even more difficult. The right tools can make all the difference.
The Reciprocity ROAR Platform, which underpins Reciprocity ZenRisk and Reciprocity ZenComply, gives you the power to be more strategic with IT risk management by putting your business activities front and center. Discover a modern way to manage your risk posture with the Reciprocity ROAR Platform, giving you the ability to understand and act on your IT and cyber risks, all in a single unified platform.
With an intuitive user experience paired with in-application expert guidance, you can assess, manage, and communicate risks and their potential business impact. Using AI, the relationships between assets, controls and risks are automatically created, alerting you to changes in your risk posture and making it simple to grow and manage your risk programs.
With dashboards and reports that provide contextual insights, it’s easier to communicate with key stakeholders and make informed business decisions with the Reciprocity ROAR platform.
Become more strategic with your IT risk management and talk to an expert today to learn more about how the Reciprocity Product Suite can help your organization confidently manage risks and compliance.