11 April, 2024

5 steps to effective compliance risk management



11 April, 2024

5 steps to effective compliance risk management

5 steps to effective compliance risk management

In today’s rapidly evolving and hyper-focused business environment, compliance risk management has become a key ingredient for nurturing future business growth. Not only does assessing your compliance risk keep businesses in check by the regulator’s standards but can help your business streamline and strengthen your processes and strategy.  

Let’s take a closer look at the benefits of an effective compliance risk management process, and how your business can achieve it.  

Why should compliance risk management be a priority for businesses? 

Neglecting to acknowledge the obstacles that could drive a wedge between your compliance processes can be a costly mistake—with research revealing that the cost of non-compliance has risen more than 45% over the past 10 years, now totalling to $14.82 million.  

With figures this high, it’s no wonder that compliance is one of the most critical contributions to business success. As well as helping organisations to identify, assess, and mitigate threats to their business, it can help provide a more structured process for measuring, monitoring, and reporting on compliance activities.  

With a solid compliance risk management strategy in place, companies can unlock benefits including: 

  • Strengthened reputation through workers following ethical business practices  
  • Enhanced trust with their customers, suppliers, and other stakeholders  
  • Minimised risk of financial loss due to non-compliance 
  • Improved ability to detect and respond to compliance issues 
  • Better chance of matching industry standards and government regulatory requirements 

5 steps to effective compliance risk management 

Having an effective compliance risk management strategy in place can make all the difference to your business, but with so many regulatory changes it can be difficult to keep up with what you need to be doing. Starting with these five steps can help:

1.Conduct a thorough risk assessment

Knowledge is power. So, getting up to speed with what you’re currently doing to manage risk and how you’re meeting the regulatory requirements for your industry is crucial for achieving an overall picture of your business’ risk profile. 

According to the Money Laundering Regulations (MLR), it’s important that firms are assessing the risk each of their clients pose, to decide how much due diligence needs to be applied when working with that particular client.  

This risk assessment includes looking at details that determine the level and extent of client due diligence required, and accounts for high-risk factors such as PEPs and sanctions. You’ll also need to look at how these risks are identified and managed within the firm-wide assessment, including what plans you already have in place to manage them, and where the gaps are. 

2. Create or refine your compliance management goals 

In order to accurately cover the ground you need to with compliance, it’s important to work with your stakeholders to define what your compliance management goals are. For example, will you be developing a robust compliance training programme for your employees? Will you want to get some compliance certifications under your belt? Or will you be focusing on establishing closer interdepartmental collaboration on compliance? 

Whatever you decide on, it’s key that you make clear the standards you are trying to attain, so that everybody is on the same page and striving towards the same compliance goals. Where possible, you’ll also want to include timelines of goal completion, and which team member will be responsible for monitoring the progress for ultimate accountability. 

3. Invest in compliance training

It’s no secret that the regulatory landscape is ever evolving, no matter what industry you’re working in, which means it can be complicated trying to keep up. But with more than money at risk when it comes to non-compliance, it’s crucial you’re properly preparing your teams to meet the requirements. And training can help. 

By investing in AML training, you can ensure you’re staying up-to-date with the regulatory requirements to prevent fraudsters from infiltrating your business and financial crime happening. Any comprehensive training programme should cover: 

  • A deep dive into money laundering: the definition, impact, forms and methods 
  • Up-to-date detail about the law on money laundering 
  • Advice on what you need to do to prevent money laundering within your firm 

Some will even provide an assessment after the modules to test your teams’ knowledge. It’s a good idea to have your team refresh their knowledge on this regularly to keep your firm on the straight and narrow. 

4. Account for routine maintenance and audits

Compliance is not a one-and-done exercise—it requires ongoing effort and continually building on your knowledge of the landscape and regulatory requirements. And as your business or circumstances change, your compliance management strategy will need to be revisited to ensure they align with the changes that have happened. For example, by adding extra compliance measures in to prevent bad actors from being able to manipulate your company for their crimes.  

As well as this, you’ll need to ensure that you’re recording and correcting any violations as and when they occur and submitting these reports to the relevant regulator. 

5. Automate your compliance processes

One common concern for firms looking to mitigate compliance risk is the sheer amount of time it can take to conduct the required compliance checks when onboarding or reviewing clients. Compliance technology is already being widely used across industries, helping to save people time and money, while streamlining the onboarding experience for clients, businesses, and employees alike.  

Choosing to automate your compliance process also enables your teams to focus on other high value-add tasks, ultimately helping to boost your business.  

Having an effective compliance risk management process needs to be high on the agenda for any regulated firm. Not only can it help keep your profits in your company, but it can also save your firm from reputational damage and potential closure.  

If you’d like to find out more about how we can help strengthen your compliance strategy with our automated data and compliance technology, please don’t hesitate to get in touch. 

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