In a post crisis era, a heightened concern has been placed on effective risk management—one that will identify, assess, and manage risk. Regulators are increasingly scrutinizing risk frameworks and are starting to hold members of the C-Suite accountable for compliance failures. Moreover, regulatory guidance such as the U.S. Sentencing Guidelines states that a robust compliance program must regularly assess the risk of criminal conduct and take the necessary measures to mitigate such risks. While perfecting the art of risk management is not something that can be achieved overnight, it can, however be cultivated.
“Superforecasters”, for example, have emerged as an integral part of compliance departments. In a Corporate Counsel post by Ryan McConnell and Stephanie Bustamante, “superforecasters” are the stakeholders who can provide information about which compliance risk area a company should shift its attention to based on trends, their expertise with the business, industry watchdogs and the environment. “If the forecasters tell you that the environmental risk of certain emission releases is particularly high with a serious impact to the company, the compliance program may partner with the business to address the risk by implementing controls and investing in equipment,” McConnell and Bustamante wrote.
Jay Cohen, Senior Vice President and Chief Compliance Officer, Assurant, an insurance provider, said that the audit committee is looking for answers about unanticipated risks and they need metrics to measure and respond to uncertainties that lie ahead. “Compliance officers often struggle with measuring risk activity. While it is nice to have 100 calls come into a company’s hotline, the audit committee wants data around risks and they are asking questions such as are the risks expanding and what are we doing to manage them”, Cohen said. “An effective risk assessment means being able to make predictions or forecast what’s to come. Analytics or data driven expertise could help subject matter experts measure risks as well.”
McConnell and Bustamente said that conducting an effective risk assessment means:
• Finding the right people
• Asking the right questions
• Focusing on sub risks
• Obtaining internal and external views
• Accounting for bias
Read the full post here.
More on this topic:
Ethisphere’s 8th Annual Global Ethics Summit will take place on March 9-10, 2016 in New York and will feature experts on risk management and much more. Register here.
