Compliance Management: the Intersection of Risk and Policy Management

At ComplianceBridge, a popular topic of discussion is – no surprise – compliance. Business must comply with a whole catalog of rules and regulations. Many are legal regulations, some are specific to an industry or a geographic area and some are voluntary rules set forth by the company itself. The one thing all these rules have in common is that they must be adhered to in order to maintain productivity and profitability. 

That’s where compliance comes into the equation. Compliance management is the practice of managing and adhering to laws, regulations, standards, policies and other codes of conduct that apply to a company. Because some rules apply to multiple departments – such as laws regarding employee safety and minimum wage – managing compliance must be a companywide practice, not something isolated to a single business unit. However, that does not mean that there shouldn’t be a single department leading the charge. 

Compliance management departments at companies with a large network of operations are integral to tracking compliance mandates and setting internal policies that protect against the risks associated with noncompliance. A central component of successfully navigating the landscape of rules and regulations is identifying, mitigating and monitoring risks both to compliance and of noncompliance. 

Risk-Based Approach to Compliance Management 

For some, there may be a disconnect between the costs of maintaining compliance and the costs of noncompliance. Some companies even plan for paying fines rather than spending that part of their budget to strengthen compliance management activities. This practice is becoming less and less popular, though, since the repercussions of noncompliance go beyond financial reparations, especially as the public becomes more aware of the business practices of corporations. 

Moreover, technology is helping compliance management to become a more affordable option than simply paying to be noncompliant. By committing to a risk-based approach to managing compliance at your company, you can easily identify and assess risks, prioritize their likelihood or severity, prioritize which risks pose the biggest threat and develop mitigation strategies for them. This allows your company to weigh the costs of failing to comply with specific rules and regulations and the cost of meeting the requirements of compliance. 

Determining Your Risks

All companies face some degree of risk, and no two companies are alike in the risks they face. Therefore, you should conduct your own risks assessment to determine what threats to compliance your company faces and how severe each of them are. During this assessment, you rank risks based on how likely they are to occur and how much damage they can cause (financially, reputationally, legally, etc.) if they do occur.  When you rank risks this way, the compliance management team will be able to better respond by enacting appropriate policies, monitoring risks and implementing mitigation procedures.

Once You Understand Your Risks

Conducting a risk assessment helps you understand the nature of your risks. Once that is complete, you’re able to determine both the type and reach of the controls you put into place to manage compliance. 

Responding to and Mitigating Risk

Responding to risk is a multi-pronged process. First, you need to maintain a clear understanding of your regulatory landscape. One responsibility of your compliance management team is tracking and acting upon regulatory alerts and updates. New laws are passed and guidelines released all the time. Simply falling behind on these updates exposes you to risks that can be easily avoided by just looking out for updates. 

Speaking of risk avoidance, this brings up the next important area of compliance management: risk mitigation strategies. For each risk you’ve identified, you need to determine a method for mitigating it. In general, there are four options: avoiding a risk, limiting exposure to a risk, transferring a risk to a willing third-party, and accepting a risk. When you choose risk acceptance, this is essentially the choice of those who decide to pay fines rather than investing in becoming compliant with a regulation. 

You also need to implement compliance reporting and tracking, paying special attention to the areas of highest risk. Beyond rule changes, other factors in your environment can change or evolve, as well. That’s why compliance teams need to constantly track potential threats by identifying triggers and setting up strategies for reporting on them. For example, if you’re evaluating the risks associated with operating a healthcare facility, experiencing a loss of power should be considered a high-priority threat to both patients and compliance with healthcare standards. A trigger for such an event could be a dangerous weather event, so you can track the likelihood of this threat transpiring by following weather forecasts and reporting any concerning changes.

Whenever noncompliance is reported, it needs to be dealt with immediately by the compliance management team. This can mean performing a new risk assessment to figure out what has changed, reevaluating their choice in mitigation strategy or developing new policies and procedures to address it. 

The Role of Policy Management

Each of the four central risk mitigation strategies is designed to address risk in a different way. The role that policies and procedures play here is in giving your company a formal basis for moving from your current level to your target state of lower risk. Higher-risk areas may demand more stringent policies and procedures to ensure compliance, but all areas at risk of noncompliance can benefit from the development of policies and procedures. 

Policies can serve several purposes for compliance management teams. They’re a great way to set operational boundaries for operations and communicate them to employees. This is especially important if you’re trying to avoid a potential threat or at least reduce your exposure to it. 

Policies and procedures are also invaluable to improving management controls. Putting better controls in place and laying out a means for enforcing them is an important aspect of managing a successful mitigation strategy. When you have robust controls in place, you’ll have more confidence in your ability to comply with standards and regulations. It also means that relevant data on risk will be reliably collected, maintained and evaluated. 

Lastly, proactive development of policies and procedures has a direct positive effect on your ability to identify processes that require additional compliance training and provide this training to employees. Policies and procedures help to introduce new rules and standards to employees and outline the methods they need to take to adhere to. Policy management unites everyone at your company with a central goal: reducing risk and managing compliance. 

United Risk & Policy Management

Risk and policy and procedure management are closely linked under the umbrella of compliance management. Once you have done the work of assessing risk and developing a strategy to respond to it, policies and procedures are an effective way to bolster your activities. To make this entire process – from initial risk assessment all the way to training employees on new policies – as straightforward and sustainable as possible, ComplianceBridge has developed a suite of products designed to help any company or organization.

ComplianceBridge Risk allows you to quickly build assessments that utilize a variety of question types including multiple choice, short answer, fill-in-the-blank, yes/no or risk rating. You can also weigh your questions for improved scoring and introduce conditional, follow-up questions. The system handles distribution and collection of assessment results. You can even monitor these results in real-time as they come in. To leverage your experts, you can divide your assessments and assign different sections to specific individuals, groups or departments. Through in-depth reporting and analysis, you can gain very targeted data about potential risks.

ComplianceBridge Policy Management gives you a powerful system equipped with the tools to create and manage your policies and procedures with ease. With a central location to edit and review new policies, document creation and revision are easy. Once a new policy or procedure has been approved by stakeholders, automatically distribute new materials to employees. To improve comprehension, policies and procedures can be accompanied by quizzes that test their understanding of the content. Quiz results can also be monitored in real-time. You can use this data to measure compliance and the success of your risk mitigation strategy.

To learn how you can utilize our ComplianceBridge products to implement a risk-based approach to compliance management, request a demo with ComplianceBridge today. We’re ready to walk you through the entire process from start to finish!