Compliance Risk Assessment (CRA) is an important methodology that every organization must carry out to protect itself from the consequences of non-compliance. Although the process isn’t complicated, you must know the right steps to execute it effectively. Hence, this post will tell you the definition of CRA, its importance, and the way you can conduct it. Go through it till the end to resolve your confusion built around CRA in the compliance process.
What Does Compliance Risk Assessment (CRA) Refer To?
Compliance Risk Assessment (CRA) refers to the process of the identification, understanding, and prioritization of legal and regulatory compliance risks. Such risks might otherwise negatively affect your organization in the form of damaged reputation, heavy penalties and fines, and loss of sales.
Note: Compliance risk assessment isn’t just another term for gap analysis. According to IT Governance, although both of these concepts share many similarities, they are different from each other. Read the next section to understand the difference between them.
Compliance Risk Assessment (CRA) Vs. Gap Analysis
The main difference between compliance risk assessment (CRA) and gap analysis is that CRA helps organizations visualize the threats facing them, their level of possibility, and the expected harm. However, gap analysis involves finding the gaps that need to be filled to achieve compliance.
In other words, CRA begins by creating a long list of risks, which will be assigned a risk score. On the other hand, gap analysis is like a simple tick-box exercise, where the unchecked requirements represent the gaps that need to be addressed.
Why Should You Conduct a Compliance Risk Assessment? The Importance
You should conduct a compliance risk assessment to discover the compliance risks and the harm they can do to your organization. Moreover, it helps prioritize the biggest risks and makes you aware of the compliance controls you should implement to prevent or mitigate them.
It means you can also consider CRA as an attempt to figure out which controls are important to implement and which can be ignored. For example, based on the information presented in your compliance risk assessment template, implementing a particular control will help prevent a huge compliance risk. In that case, your compliance team should invest more time and resources to implement it as compared to the controls that aren’t as important.
IT Governance even says that if there are no risks that would justify using a specific control, you don’t need to implement it.
How Can You Perform a Compliance Risk Assessment?
You can perform a compliance risk assessment by executing a five-step procedure. It includes identification of the risks, evaluation of the results of non-compliance, prioritization of major risks and creation of mitigation strategies, plan execution and result testing, and score comparison.
Here, if you use a compliance risk assessment PDF, matrix, or template Excel, you’ll be able to organize and present the collected information easily.
1. Identification of the Risks
Begin with identifying the compliance risks for your organization. You might hire a risk assessor in your team who’ll create a list of potential vulnerabilities for you to consider. Moreover, understanding the requirements, policies, and standards, and conducting internal audits can help identify the possible threats.
2. Evaluation of the Non-compliance Consequences
Once you have figured out the risks, you should go for the evaluation of the consequences of non-compliance. For example, your risk assessor just informed you that your organization might be charged heavy fines due to non-compliance with GDPR. Now, paying such fines can disrupt your organization’s budget and impose financial burdens.
3. Prioritization of Major Risks and Creation of Mitigation Strategies
After identifying the risks and considering their consequences, you should organize the risks based on their risk score, and create mitigation strategies for the same. This way you’ll ensure that all the major risks are considered and planned to be resolved first.
4. Execution of the Plans and Testing of the Results
Next, execute the plans and strategies that you developed in the previous step to ensure that you achieve compliance and save your organization from compliance risks. Don’t forget to test the results to see if your policies and plans are working as per your expectations.
5. Compare the Risk Scores
Lastly, compare the previous risk scores against the current scores to gain clarity about the impact you’ve made, and think about any better procedures to lower, mitigate, and prevent the said compliance risks.
Furthermore, if you ask, “Compliance risk assessment is carried out at which interval?” Its simplest answer would be at least once a year.
Conclusion
According to the facts and information stated above, compliance risk assessment is a necessary procedure in the compliance process. It gives you clarity regarding the compliance risks and helps you mitigate and prevent them efficiently. Here are some important notes from the post:
- Compliance risk assessment (CRA) involves the identification, understanding, and prioritization of compliance risks.
- CRA and gap analysis are two different processes.
- CRA helps prioritize huge risks and informs you about the compliance controls that you must implement to deal with them.
- You can perform a CRA by following a five-step process.
Moreover, if you are looking to streamline your compliance process, don’t forget to set up a ComplyNexus tour with us.