To build a successful business you’ll need to acquire new customers, save on costs, and avoid major pitfalls that could impact your bottom line. An important aspect of this is managing your organization's compliance risk. These include the risk of penalties, legal judgments, and other issues that could come as a result of not complying with legal regulations and industry standards.
In this guide, we’ll help you understand what compliance risk management is, why it's important, and provide you with some best practices to help you protect your organization.
What is compliance risk management?
Risk management describes the process of identifying and analyzing potential risks and taking precautions to minimize them. Compliance risk management is the process of managing the risk that comes with not complying with regulations that you’ve committed to or are required to comply with by law.
For example, you’ll need to figure out which regulations and standards you must follow — such as GDPR, HIPAA, or SOC 2 — and identify areas of non-compliance and create a plan to mitigate these. This minimizes your risk of legal fines, breach of contract lawsuits, and other potential consequences.
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Why is compliance risk management important?
In many cases, there are consequences for not being compliant with legal regulations or standards your organization has committed to — such as legal fines or loss of business. Compliance risk management can help you avoid costly consequences, such as:
- Legal penalties and fines: Government regulations like GDPR, HIPAA, CCPA, and tax laws have penalties for non-compliance that could result in millions of dollars in fines.
- Inability to perform essential functions: Some standards and regulations will stop you from doing business if you are not compliant. For example, if you don’t comply with PCI DSS you may not be able to process payments.
- Blocked from certain markets: Some regulations are required to do business in certain regions. For example, you can’t collect data from EU citizens if you don’t comply with GDPR or your business could incur severe fines.
- Loss of business: Not complying with regulations and standards that are either required or best practice in your industry could make it difficult to acquire customers.
Compliance risk management best practices
1. Know the standards relevant to your industry
Regulations typically apply to specific sectors and areas of work, such as HIPAA in the healthcare industry. As a result, each organization has its own regulations and standards it must follow. Your company may need to comply with many regulations depending on your business, your customers, the data your company handles, and the partners you do business with.
Here are some examples of regulations that are relevant to certain organizations depending on the region and industry they do business in:
- GDPR: GDPR is the General Data Protection Regulation, a law that was established in 2018 to give individuals greater control over their personal data. GDPR applies to any organization that processes the personal information of individuals inside the European Economic Area (EEA), comprised of the European Union, its member states, and the three states of the European Free Trade Association.
- CCPA: CCPA is the California Consumer Privacy Act, effective as of January 1 2020, which impacts companies that collect data from California residents. It’s similar to GDPR, with a similar goal of protecting consumers’ data privacy and providing data transparency.
- HIPAA: HIPAA is the acronym for the Health Insurance Portability and Accountability Act, passed by Congress in 1996 with the goal of improving health care transparency and the handling of confidential health information. HIPAA compliance is required of organizations and employees who work in or with the healthcare industry and have access to protected health information (PHI).
2. Use a forward-looking approach
As technology evolves, the capabilities of hackers advance as well. While a reactive risk management strategy may have worked before, your business now needs a proactive strategy that puts your company ahead of compliance risks (and competitors) and protects you from data breaches. Your compliance risk management strategy should focus on identifying potential compliance gaps and mitigating them before they become a threat, rather than requiring your team to urgently react to compliance issues as they arise.
3. Establish an integrated compliance risk management strategy
It’s important to create a compliance risk management strategy that is applied across your organization — integrating key voices and insights to ensure that compliance has been considered from every angle. This input gives you a clear and comprehensive understanding of the rules and regulations impacting your business.
Using this integrated approach, all components of your company must operate in sync. If one part of the company has good compliance processes but another area does not, the company as a whole suffers from that non-compliance.
4. Replicate your organizational structure to assess risks
Engage senior managers, risk specialists, and other representatives from departments across your organization to get a complete picture of your organization’s risks. Doing this will help you build a risk management structure that matches your company’s organizational structure.
Together, your cross-departmental compliance risk management team can consider the regulations that impact your industry, evaluate your company’s compliance, and assess resource needs and distribution to support the compliance strategy.
5. Adhere to common compliance frameworks
The process of getting and staying in compliance will be different for every company, but typically involves assessing your security controls against a particular standard or set of guidelines. By adhering to this standard, you’re showing your customers and prospects that you’re committed to effectively protecting their data.
Two common frameworks used by companies that manage customer data are SOC 2 and ISO 27001:
- A SOC 2 report lists a company’s verified security practices as observed by an external auditor. To get a SOC 2, your security infrastructure will be assessed against the five Trust Services Criteria: security, availability, processing integrity, confidentiality, and privacy. Each of these criteria have a set of controls or practices to follow when applicable to your organization.
- ISO 27001 is a set of requirements for an information security management system (ISMS) that helps protect consumer data by applying a risk management process to an organization’s people, processes, and IT systems.
6. Identify the right compliance tools to help you manage risk
Compliance tools can help your company monitor internal systems and controls to ensure you’re compliant with the laws and standards you’ve committed to. Compliance software is key to your organization’s compliance risk management strategy as it provides continuous tracking, monitoring, and tools to assess your compliance against a set of standards.
7. Create training materials for employees and stakeholders
Once you’ve developed an integrated compliance risk management strategy that involves broad company participation, you’ll want to ensure that every employee at your company is operating within your established compliance practices by providing them with security training.
Training is an essential part of the compliance risk management process as you need all of your employees to be operating from a shared knowledge base to keep your organization compliant. The training materials you create should provide guidelines about what compliance looks like at your company and if any departments have specific regulations they need to follow.
Simplify compliance risk management with Vanta
Developing a holistic approach to security and compliance and establishing a scalable risk-management process requires investment and collaboration across your company. By properly investing in a proactive approach to compliance will help save your company time, energy, and money while protecting your business from potential risks.
Vanta is the leading trust management platform with compliance automation capabilities. Our solutions can help your company establish a comprehensive, advanced, and organized compliance risk management system that can help you avoid the costs and risks of non-compliance. Learn more about Vanta and how it can help strengthen your organization’s risk management strategy.
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Compliance
The complete guide to compliance risk management
Compliance
To build a successful business you’ll need to acquire new customers, save on costs, and avoid major pitfalls that could impact your bottom line. An important aspect of this is managing your organization's compliance risk. These include the risk of penalties, legal judgments, and other issues that could come as a result of not complying with legal regulations and industry standards.
In this guide, we’ll help you understand what compliance risk management is, why it's important, and provide you with some best practices to help you protect your organization.
What is compliance risk management?
Risk management describes the process of identifying and analyzing potential risks and taking precautions to minimize them. Compliance risk management is the process of managing the risk that comes with not complying with regulations that you’ve committed to or are required to comply with by law.
For example, you’ll need to figure out which regulations and standards you must follow — such as GDPR, HIPAA, or SOC 2 — and identify areas of non-compliance and create a plan to mitigate these. This minimizes your risk of legal fines, breach of contract lawsuits, and other potential consequences.
{{cta_withimage1}}
Why is compliance risk management important?
In many cases, there are consequences for not being compliant with legal regulations or standards your organization has committed to — such as legal fines or loss of business. Compliance risk management can help you avoid costly consequences, such as:
- Legal penalties and fines: Government regulations like GDPR, HIPAA, CCPA, and tax laws have penalties for non-compliance that could result in millions of dollars in fines.
- Inability to perform essential functions: Some standards and regulations will stop you from doing business if you are not compliant. For example, if you don’t comply with PCI DSS you may not be able to process payments.
- Blocked from certain markets: Some regulations are required to do business in certain regions. For example, you can’t collect data from EU citizens if you don’t comply with GDPR or your business could incur severe fines.
- Loss of business: Not complying with regulations and standards that are either required or best practice in your industry could make it difficult to acquire customers.
Compliance risk management best practices
1. Know the standards relevant to your industry
Regulations typically apply to specific sectors and areas of work, such as HIPAA in the healthcare industry. As a result, each organization has its own regulations and standards it must follow. Your company may need to comply with many regulations depending on your business, your customers, the data your company handles, and the partners you do business with.
Here are some examples of regulations that are relevant to certain organizations depending on the region and industry they do business in:
- GDPR: GDPR is the General Data Protection Regulation, a law that was established in 2018 to give individuals greater control over their personal data. GDPR applies to any organization that processes the personal information of individuals inside the European Economic Area (EEA), comprised of the European Union, its member states, and the three states of the European Free Trade Association.
- CCPA: CCPA is the California Consumer Privacy Act, effective as of January 1 2020, which impacts companies that collect data from California residents. It’s similar to GDPR, with a similar goal of protecting consumers’ data privacy and providing data transparency.
- HIPAA: HIPAA is the acronym for the Health Insurance Portability and Accountability Act, passed by Congress in 1996 with the goal of improving health care transparency and the handling of confidential health information. HIPAA compliance is required of organizations and employees who work in or with the healthcare industry and have access to protected health information (PHI).
2. Use a forward-looking approach
As technology evolves, the capabilities of hackers advance as well. While a reactive risk management strategy may have worked before, your business now needs a proactive strategy that puts your company ahead of compliance risks (and competitors) and protects you from data breaches. Your compliance risk management strategy should focus on identifying potential compliance gaps and mitigating them before they become a threat, rather than requiring your team to urgently react to compliance issues as they arise.
3. Establish an integrated compliance risk management strategy
It’s important to create a compliance risk management strategy that is applied across your organization — integrating key voices and insights to ensure that compliance has been considered from every angle. This input gives you a clear and comprehensive understanding of the rules and regulations impacting your business.
Using this integrated approach, all components of your company must operate in sync. If one part of the company has good compliance processes but another area does not, the company as a whole suffers from that non-compliance.
4. Replicate your organizational structure to assess risks
Engage senior managers, risk specialists, and other representatives from departments across your organization to get a complete picture of your organization’s risks. Doing this will help you build a risk management structure that matches your company’s organizational structure.
Together, your cross-departmental compliance risk management team can consider the regulations that impact your industry, evaluate your company’s compliance, and assess resource needs and distribution to support the compliance strategy.
5. Adhere to common compliance frameworks
The process of getting and staying in compliance will be different for every company, but typically involves assessing your security controls against a particular standard or set of guidelines. By adhering to this standard, you’re showing your customers and prospects that you’re committed to effectively protecting their data.
Two common frameworks used by companies that manage customer data are SOC 2 and ISO 27001:
- A SOC 2 report lists a company’s verified security practices as observed by an external auditor. To get a SOC 2, your security infrastructure will be assessed against the five Trust Services Criteria: security, availability, processing integrity, confidentiality, and privacy. Each of these criteria have a set of controls or practices to follow when applicable to your organization.
- ISO 27001 is a set of requirements for an information security management system (ISMS) that helps protect consumer data by applying a risk management process to an organization’s people, processes, and IT systems.
6. Identify the right compliance tools to help you manage risk
Compliance tools can help your company monitor internal systems and controls to ensure you’re compliant with the laws and standards you’ve committed to. Compliance software is key to your organization’s compliance risk management strategy as it provides continuous tracking, monitoring, and tools to assess your compliance against a set of standards.
7. Create training materials for employees and stakeholders
Once you’ve developed an integrated compliance risk management strategy that involves broad company participation, you’ll want to ensure that every employee at your company is operating within your established compliance practices by providing them with security training.
Training is an essential part of the compliance risk management process as you need all of your employees to be operating from a shared knowledge base to keep your organization compliant. The training materials you create should provide guidelines about what compliance looks like at your company and if any departments have specific regulations they need to follow.
Simplify compliance risk management with Vanta
Developing a holistic approach to security and compliance and establishing a scalable risk-management process requires investment and collaboration across your company. By properly investing in a proactive approach to compliance will help save your company time, energy, and money while protecting your business from potential risks.
Vanta is the leading trust management platform with compliance automation capabilities. Our solutions can help your company establish a comprehensive, advanced, and organized compliance risk management system that can help you avoid the costs and risks of non-compliance. Learn more about Vanta and how it can help strengthen your organization’s risk management strategy.
{{cta_testimonial2}}
Scaling your compliance doesn't have to SOC 2 much.
Learn how to add new frameworks to your compliance program without adding to your workload.
Scaling your compliance doesn't have to SOC 2 much.
Learn how to add new frameworks to your compliance program without adding to your workload.
Scaling your compliance doesn't have to SOC 2 much.
Learn how to add new frameworks to your compliance program without adding to your workload.
Vanta gives us broad visibility across our business. We are immediately alerted to any critical vulnerabilities so we can deal with them straight away. It’s a single pane of glass for us.”
Nathan Miller, Head of Information Security & Compliance | Dovetail
| Role: | GRC responsibilities: |
|---|---|
| Board of directors | Central to the overarching GRC strategy, this group sets the direction for the compliance strategy. They determine which standards and regulations are necessary for compliance and align the GRC strategy with business objectives. |
| Chief financial officer | Primary responsibility for the success of the GRC program and for reporting results to the board. |
| Operations managers from relevant departments | This group owns processes. They are responsible for the success and direction of risk management and compliance within their departments. |
| Representatives from relevant departments | These are the activity owners. These team members are responsible for carrying out specific compliance and risk management tasks within their departments and for integrating these tasks into their workflows. |
| Contract managers from relevant department | These team members are responsible for managing interactions with vendors and other third parties in their department to ensure all risk management and compliance measures are being taken. |
| Chief information security officer (CISO) | Defines the organization’s information security policy, designs risk and vulnerability assessments, and develops information security policies. |
| Data protection officer (DPO) or legal counsel | Develops goals for data privacy based on legal regulations and other compliance needs, designs and implements privacy policies and practices, and assesses these practices for effectiveness. |
| GRC lead | Responsible for overseeing the execution of the GRC program in collaboration with the executive team as well as maintaining the organization’s library of security controls. |
| Cybersecurity analyst(s) | Implements and monitors cybersecurity measures that are in line with the GRC program and business objectives. |
| Compliance analyst(s) | Monitors the organization’s compliance with all regulations and standards necessary, identifies any compliance gaps, and works to mitigate them. |
| Risk analyst(s) | Carries out the risk management program for the organization and serves as a resource for risk management across various departments, including identifying, mitigating, and monitoring risks. |
| IT security specialist(s) | Implements security controls within the IT system in coordination with the cybersecurity analyst(s). |
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