The compliance risk environment is changing rapidly. Regulatory, legal, and governmental uncertainties, along with geopolitical risks, the use of AI, and increased regulatory requirements, are all putting pressure on compliance functions to demonstrate their value while managing new types of risks.
To help businesses navigate this landscape cost-efficiently and ensure effective risk management, Gartner has outlined four key capabilities for managing compliance risks.
Key Capabilities for Managing Compliance Risks
1. Establish a Consistent Risk Posture Across the Organization
Clear communication of risk appetite is essential to avoid overly conservative legal advice. To achieve this, create a structured process to operationalize risk appetite using tools like playbooks, repositories, and risk scorecards.
This ensures consistent application across the organization. Engage with peers in other business and risk functions to learn how they articulate and communicate risk appetite to their teams.
2. Enhance Compliance Standards
Employees often struggle with an increasing number of compliance obligations. Establishing quality compliance standards—documented principles, specifications, guidelines, or characteristics—can guide the design, execution, monitoring, and improvement of compliance activities.
These standards not only encourage compliant behavior but also help monitor compliance effectiveness over time. Implement a structured methodology for assessing risk management policies and procedures against predefined quality standards.
3. Implement Cross-Functional Data Governance
In responding to new compliance reporting requirements in areas such as cybersecurity, environmental, social, and governance (ESG), and AI, legal teams need to gather and report on various metrics, many of which are stored inconsistently across the organization and among third parties.
A data governance framework defines ownership, processes, decision rights, and accountability for managing and leveraging data assets. It also promotes transparency and facilitates collaboration across functions, ensuring consistent data storage, tracking, and reporting practices, which are vital for effective compliance.
4. Adopt Strategic Risk Management to Support Business Growth
High-growth companies often take aggressive risks and allocate capital swiftly. However, global uncertainty and a complex decision-making environment can make executive leaders hesitant to take risks.
Implementing strategic risk management during key business initiatives—such as acquisitions, geographic expansions, and significant investments—can increase the likelihood of achieving objectives while managing current risks and exploring future opportunities.
Important aspects of strategic risk management include:
- Coordinated risk and assurance across management functions to eliminate execution barriers and reduce delays in completing business initiatives.
- A strategic focus that identifies where the organization is positioned to take risks with potential upside while remaining aligned with risk appetite.
- An adaptive approach that addresses barriers to success and adjusts support as material conditions change throughout the life cycle of an initiative.
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