What next? That seems to be the question on everyone’s minds. Due to the COVID-19 pandemic, the future is not what we thought it would be until a few months ago. Similarly, the compliance and risk assessment landscape for businesses has turned on its head as well. The pandemic has resulted in unprecedented regulatory and industry disruptions in a condensed period, which has led to colossal changes regarding how organizations operate, what managers and regulators expect, and how to manage risk going forward.
Compliance and risk assessment, like other functions at most organizations, are usually engaged in managing the risks of day-to-day business operations. However, considering the massive disruption caused by the pandemic, new risks can materialize, and existing risks can snowball into huge problems. Risk assessment officers and their teams have to quickly step up and deliberate various risks and challenges created by these abrupt changes. Subsequently, risk assessment officers must perform dynamic and frequent risk assessments to comprehend the scenario and comprehensively address the risks.
Before delving deep into risk management, it is necessary to understand what risk assessment is, its purpose, and its types. The aim of performing a risk assessment is to analyze and investigate different risks, then mitigate or reduce those risks with the help of control measures. There are three types of risk assessments, which include:
Baseline Risk Assessments
Baseline risk assessments are carried out to determine and understand business risks for the first-time. Typically, baseline risk assessments should be carried out regularly to re-establish the standard risk profile to reduce the chances of risks occurring in an organization.
Issue-Based Risk Assessments
Issue-Based Risk Assessments are performed to highlight problems, aspects, or processes that are facing risks in the organization. Fault Tree Analysis, HAZOP, and FMEA are some of the methods used to carry out issue-based risk assessments.
Continuous Risk Assessments
Continuous risk assessments are a part of the informal or formal observations and inspections that take place in an organization daily or at regular intervals. It monitors, formulates, and integrated control ecosystems to mitigate risks, if and when they arise.
As a part of the new normal, risk assessment officers have to think about how to optimally deploy the company’s resources to manage risk in this trying landscape. To understand the process better, risk assessment officers should answer the following questions:
Where did the risk of this pandemic fall within the latest risk assessment results?
Are any technological tools being developed for consolidated risk reporting, including the establishment of key risk indicators that apply to the pandemic risk?
Is there a need to appraise the current risk appetite framework to understand the pandemic’s impact on the organization’s existing risk profile?
What risks have materialized (for example, heightened cyber threats due to work from home) and if there are any systems in place to report, collect, and examine such emerging risks?
Are current risk assessment methods and internal audit plans being re-evaluated to ensure they sufficiently cover the pandemic risk elements?
Once these questions have been answered in detail, only then can organizations navigate to the new normal with help from their compliance and risk assessment officers. There are several steps in which this can be done:
Give Greater Importance to Dynamic Risk Assessment
At this point, dynamic risk assessments should be embedded in the foundation of every organization. The assessments should be regularly updated to be prepared for the future and to prevent any compliance issues that may crop up. C-Suites in organizations must assist the risk assessment department in formulating and implanting of business processes, IT systems, and internal controls to mitigate risks that may occur.
Manage Compliance in a Remote Working Environment
A new normal will require the compliance and risk assessment departments to ensure that the organization’s workforce has the necessary access and tools needed to perform their fundamental duties. They also have to ascertain that employees maintain connectivity with each other and the business since co-location is not possible.
Refocus the Medium-Term Strategy of the Organisation
While adapting to the new ordinary, risk assessment officers must review the organization’s overall risk and compliance strategy. It is essential to work with the C-Suites to finalize the changes in risk profile and business strategy and to ensure the critical compliance risks are being managed. Due to the work from home scenario, the C-Suite, in conjunction with the risk assessment officer, may decide to accelerate plans related to the up-gradation of workflow tools and electronic communications surveillance. At the same time, plans that were important in a pre-COVID era may be deprioritized.
Expand the Risk Assessment and Compliance Operations
Due to the emergence of new risks as a result of the pandemic, organizations should re-think their compliance and risk assessment requirements. Any delay from the organization to implement risk assessment tests, compliance audits, or internal investigations can adversely affect employee morale and have a direct impact on the organization’s reputation. In case, organizations do not have enough manpower in the risk assessment department, they can reach out to external support or outsourced consulting services to assist them with their responsibilities.
Keep a Lookout for Financial and Data Fraud
There has been a marked increase in financial scams and frauds amid this pandemic, as compared to before it. In fact, in March and April, more than 100 million risky transactions were identified. Scammers are capitalizing on the fear caused by COVID-19 and are manipulating unsuspecting victims to part with their money. In terms of organizations, the risk areas related to financial fraud can include contingent reserves, valuation of organizational assets, management estimates, revenue recognition, expense accounts, employee data, and expansion plans and strategies. Thus, the risk assessment department in coordination with the management team should deliberate implementing stringent testing plans, auditing, and dialling-up monitoring.
To combat challenges that have emerged with COVID-19 and to navigate into the new normal, risk assessment officers should increase collaborations across risk functions and leverage innovative tools and technologies.
COVID-19 has reminded everyone that pandemic risk is real and is capable of altering an organization’s risk profile. It has also made it crystal clear that organizations must have a plan to manage and gauge all critical risks and be prepared for those risks to intensify anytime in the future. Such challenging times require expert knowledge to formulate risk strategies and controls to mitigate risks. An effective way to find such expertise for your organization is by partnering with reputed risk management advisory services.
We, at TRC Corporate Consulting help businesses, identify, measure and determine risks. We tailor-make risk management solutions for businesses in a way that eliminates maximum risk and enhances opportunities. Our risk management specialists help you achieve your organizational objectives effectively and efficiently, which is needed now more than ever. For any understanding about our risk advisory services, get in touch with our team!
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