Regulatory Risk Assessment Processes

What's the most expensive PDF sitting on your SharePoint? For most banks, it's their BSA/AML risk assessment and it's costing them $2-5M in remediation costs, consent orders, and reputation damage per exam cycle. Examiners don’t care how “pretty” your risk assessment looks. They care whether it actually drives your program. And if it doesn’t? They’ll happily step in and dictate your strategy for you. (It’s happening right now across the industry, and the price tag is measured in millions.) Here’s the trap I see over and over: Banks spend weeks pulling together a “comprehensive” BSA/AML risk assessment. They map out products, services, customers, geographies. They drop it into a SharePoint folder. And then… nothing. - The risk assessment never gets tied to staffing. - Monitoring rules don’t change. - Training isn’t prioritized around actual risks. - The audit plan is just recycled from last year. So, when examiners show up, they immediately see the disconnect: Your glossy risk assessment is a “point in time document.” Not a living one. That’s when findings pile up. And once findings pile up, you don’t control the roadmap anymore - the regulators do. What a living risk assessment actually looks like: Here's what examiners are really looking for. They don't just check boxes, they trace risk decisions through your entire program. If your risk assessment says "high-risk MSBs" but your monitoring rules are generic? They see a control gap, not a documentation issue. ✔️ It maps inherent risks → specific controls → monitoring/testing. ✔️ Each high-risk area has a named owner. ✔️ It’s refreshed when things change (new product, new partner, new system). ✔️ It directly informs staffing, training, and audit/testing schedules. This isn’t about making the risk assessment bigger. It’s about making it functional. Quick example: A client launched a new payments product. Their risk assessment mentioned it. But their monitoring rules, staffing plan, and training program didn’t change. Examiners flagged it instantly: “You acknowledged the risk but did nothing to mitigate it.” That one gap contributed to a consent order article that cost them seven figures in remediation. All because the risk assessment was treated as paperwork instead of a playbook. 💡 Manager move you can try this week: Pull your last risk assessment. For every high-risk area, ask: - What control do we have? - Who owns it? - When is it being tested? If you can’t answer in 30 seconds, your risk assessment is static, not living. 👉 Here’s the bottom line: A risk assessment that sits on the shelf will get you exam findings. A risk assessment that drives decisions will keep you in control. And when examiners show up, you'll have answers - not excuses. The choice is yours.

Is process management the key to a strong risk and compliance environment? Large organizations spend significant amounts managing their complex risk and regulatory needs and many hemorrhage billions in fines for weak controls. This is primarily caused by an explosion in the regulatory environment and the increasing complexity of their internal environments. The implications go beyond cost though as weak controls can jeopardize customers, their stakeholders, and the markets they serve. The root of the challenge is in the poor quality of risk data, specifically in aligning risk to the organization’s objectives. ISO 31000 defines risk as the uncertainty on objectives. Objectives are achieved by executing processes. The problem is that most organization don’t have an accurate map of their processes. Many anchor their risk data on a generic process taxonomy for their unique business units. This one-size-fits-all approach leads to inconsistent interpretations. Business units struggle to align their risks to this generic taxonomy, resulting in assumptions, interpretations and misalignments. The results in: -  Untraceable Risks: Risks couldn’t be mapped to the specific processes each business executed - Regulatory Gaps: Compliance obligations couldn’t be reliably tied to processes - Confusion Across Risk Roles:  Lack of clarity in the business, risk oversight, and internal audit - Inaccurate Reporting: Management and regulators received flawed risk reports, undermining trust and decision-making The solution is to create a comprehensive Process Inventory by conducting top-down interviews of each business unit to capture their unique processes. For each process identified capture the definition of the process, the specific owner, technology leveraged, and other critical meta data. This taxonomy should be the anchor taxonomy in the risks repository which enables direct linkage between objectives of the organization. The results in clear in risk assessment, direct mapping of regulatory obligations to processes, stronger controls and ultimately more controlled risk for your customers and stakeholder. If you work in risk, does this describe your risk environment? Please let me know your thoughts. To learn more about this approach, check out my book https://a.co/d/1ajgWhI

In this post I want to address the #oig General Compliance Program Guidance (GCPG) section on Risk Assessments? For years, I have been emphasizing the importance of "risk" as the 8th element of an effective compliance program (just ask Eric Rubenstein, MSCJ, CFE & Jordan Johnson, MSHA, iMPaCT). Finally, the GCPG has recognized the significance of risk assessments in their guidance. So, what exactly is a compliance risk assessment? It is a process that evaluates specific organizational risks based on possible violations of healthcare regulations. Remember, compliance risk assessments are not a one-time activity; they should be ongoing throughout the year to ensure that new challenges are addressed properly. Conducting a proper risk assessment is crucial to avoid any gaps in the process. It should be a formal process that pulls information about risks from a variety of internal and external sources, evaluates and prioritizes them, and then decides how to address them. Data analytics is the key to identifying compliance risk areas. All entities, regardless of size, should have access to the data they generate, either directly or through a third party, such as a billing contractor. Data analytics efforts may range from simple to complex depending on an entity’s volume of data as well as the entity’s data analytics capabilities and resources. Between compliance risk assessments, the compliance officer should continue to scan for unidentified or new risks. By monitoring for legal and regulatory changes, enforcement actions and OIG work plan developments, and new entity acquisitions, strategies, or initiatives, and evaluating audits and investigation results, compliance officers can ensure that their risk assessments are up-to-date. If you need any assistance in developing your internal risk assessment, feel free to DM me or visit my website at www.thecomplianceguy.com.

🔍 What Is a Risk Assessment Methodology? A risk assessment methodology is the structured approach an organization uses to identify, analyze, evaluate, and prioritize risks. It ensures consistent, repeatable assessments across all business areas and is essential for risk-informed decision-making. ⸻ ✅ Core Components of a Risk Assessment Methodology: 1. Risk Identification • Pinpoint what could go wrong (risk events). • Sources: business processes, historical incidents, regulatory changes, third-party risks, IT systems, etc. • Tools: brainstorming, risk checklists, process walkthroughs, SWOT, interviews, PESTLE. 2. Risk Analysis • Determine the likelihood and impact of each risk. • Approaches: • Qualitative (e.g., High/Medium/Low or Heat Maps) • Semi-quantitative (e.g., scoring systems 1–5 for likelihood and impact) • Quantitative (e.g., Monte Carlo, VaR, financial modeling) 3. Risk Evaluation • Compare risk levels to your risk appetite and tolerance thresholds. • Decide which risks are acceptable, and which need treatment or escalation. 4. Risk Prioritization • Rank risks based on their score to allocate resources effectively. • Often visualized in a risk matrix or heat map. 5. Risk Treatment (Optional in Assessment Phase) • Recommend how to handle critical risks: • Avoid • Transfer • Mitigate (via controls) • Accept 📊 Common Methodologies Used: 1️⃣ISO 31000 Framework Emphasizes integration, structure, and continuous improvement in risk management. 2️⃣ COSO ERM Framework Aligns risk with strategy and performance across governance, culture, and objective-setting. 3️⃣ Basel II/III for Financial Risk Used in banking and finance, focusing on credit, market, and operational risk. 4️⃣ NIST Risk Assessment Applied in cybersecurity and federal agencies, emphasizing threats, vulnerabilities, and impacts. 🎯 Best Practices: • Use both inherent and residual risk ratings. • Involve first-line teams for accurate process-level risk input. • Align methodology with risk appetite and strategic objectives. • Document risk criteria (likelihood/impact definitions) clearly. • Update the risk assessment periodically or after significant events.

The Solicitors Regulation Authority has released a new guidance document on "Sanctions regime - firm-wide risk assessments" The guidance is designed to help firms understand and comply with legal and regulatory obligations related to the UK's sanctions regime. It applies to all firms, and aims to assist in assessing and managing exposure to risks associated with sanctions. ➡ Firms are encouraged to conduct a sanctions risk assessment, even though it is not compulsory. The assessment should consider factors such as multi-jurisdictional transactions, complex corporate structures, high net-worth individuals, trusts, and charitable organizations. 📣 The document stresses the importance of having a firm-wide risk assessment, which should be regularly reviewed, kept up to date, and approved by senior management. It should assist in developing appropriate policies, controls, and procedures. ✅ The Office for Financial Sanctions Implementation (OFSI) may take a risk-based approach to enforcement and considers good mitigation when decisions are made in good faith based on proper due diligence The guidance includes examples of (1) good questions to ask; (2) good practice; and (3) bad practice in the following sanction risk areas: ➡ Clients and counterparties ➡ Geographical area ➡ Products and services ➡ Delivery channels ➡ Transactions ➡ Licensing The guidance is considered a living document and will updated on an ongoing basis: https://lnkd.in/gWGA7fnK Have questions about your firm wide risk assessment? Don't hesitate to reach to us at Plenitude Consulting #sanctions #bwra #riskassessment