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Compliance Risk Assessment Guide (7 Steps for Success)

Unlock valuable insights into financial industry compliance, with expert advice on gearing up for regulatory visits, choosing the right assessment partners, and understanding crucial assessment steps that drive organizational success.

Mastering compliance in the financial services industry means meticulously dissecting your business activities and operational risks—known as compliance risk assessments. Sharpen, streamline and supercharge your bank’s compliance risk assessment with seven essential actions. Consider collaborating with an impartial partner, like Bridgeforce, to cut through complexity and give you the benefit of an unbiased perspective.

This blog serves as your roadmap to understand critical factors of a compliance assessment, identify strategic partners, and make the most of the process for your organization.

Seven Key Steps in a Compliance Risk Assessment Process

Critical factors of a bank compliance risk assessment

1. Understand the Basis for the Assessment

A robust compliance program assessment should be grounded in regulator expectations. For instance, at Bridgeforce, we use Compliance Management Systems (CMS) and product-oriented CFPB exam manuals to create detailed assessment matrices. These matrices clearly define regulatory obligations and what regulators expect to see when they visit organizations.

2. Define the Scope of the Assessment

A full-scale compliance assessment covering every regulation applicable to your financial institution might be time-consuming and costly. Instead, consider defining risk-informed, targeted assessment scopes. By focusing on high-profile, high-risk regulations and processes, you can identify strengths and enhancement opportunities. The regulatory environment is vast, and it is generally financially impractical for an organization to evaluate every single obligation across all products and statutes, particularly for small and mid-sized institutions. This approach allows for development and execution of a risk-informed, prioritized enhancement roadmap with confidence.

3. Choose Experienced Partners to Conduct Your Assessment

You want people who have been there and done that. Choose professionals who have firsthand experience managing the challenges you’re facing and can bring real-world solutions. At Bridgeforce, our comprehensive risk assessments are conducted by experienced professionals, 90% of whom have leadership experience across the consumer credit lifecycle. Our gap assessments and recommendations for enhancement are practical and sustainable.

4. Know Your Expectations

Regulatory compliance is not a “one size fits all” situation. Your assessment should be based on the size and scope of your operations. At Bridgeforce, we understand that expectations for a small credit union differ from those for a top 5 bank. We have worked with a range of organizations and adapt our approach accordingly.

RELATED CONTENTFintech receives valuable guidance on risk-based enhancement roadmap from Bridgeforce assessment

5. Consider the Orientation of the Assessment

We recommend a process orientation over a strictly regulatory one. At Bridgeforce, we take the time to understand how a client’s operations are structured. Our deep experience in running consumer credit operational areas allows for quicker identification of areas of heightened emerging risks in operational processes.

“I want Bridgeforce to conduct my CMS Assessment because they get it – they are the cream of the crop.”— Bridgeforce Client

6. Expect Detailed and Actionable Deliverables

The output of your assessment should be detailed and actionable. It should identify strengths to maintain and areas of opportunity to enhance regulatory compliance management systems. Areas of opportunity should be prioritized to guide your organization through the work to implement recommended enhancements.

7. Ensure Knowledge Transfer

To sustain the momentum established during the project, financial institutions need a clean and comprehensive hand-off of documentation and knowledge transfer at the end of the engagement. At Bridgeforce, we work closely with client subject matter experts to ensure that our recommendations for enhancement are clear and well understood by the people who will be implementing them. If we are asked to help implement recommendations, we ensure a clean handoff of documentation and in-depth knowledge transfer to client SMEs so that they are well-positioned to sustain the enhancements ongoing.

How to Find a Partner for your Risk Mitigation Efforts

If you are nearing $10B in assets and preparing for a CFPB visit, or if you are proactively seeking an unbiased review of your Compliance Management System (CMS), understanding what to look for in a partner is crucial. Equally important is knowing how to assess the proposals you receive. These factors are key to making an informed decision.

Start by finding potential organizations with a strong track record in the financial services industry. Look for those that demonstrate a deep understanding of regulatory expectations and have experience working with institutions of similar size and scope as yours. Check their references and reviews to gauge their reputation.

Considerations to Find the Right Fit for You

Remember, a good compliance assessment partner is not just about expertise. They should be able to tailor their approach to your specific operations, provide actionable and detailed deliverables, and ensure a smooth knowledge transfer process. They should also be agnostic, providing an unbiased perspective that prioritizes your institution’s best interests, not theirs.

Finding the right third-party organization for a compliance assessment is no small task. However, with careful consideration and due diligence, you can find a partner that not only helps you meet regulatory requirements but also enhances your operations. This effort can contribute to your institution’s success.

Bridgeforce is a Trusted Partner for Compliance Risk Assessments

In the dynamic realm of financial services, staying ahead of regulatory requirements is non-negotiable. Whether you’re a fintech, a credit union or a top 5 bank, understanding the ins and outs of compliance assessments is paramount for sustained success. Plus, navigating compliance issues requires a strategic approach backed by expertise and insight.

With Bridgeforce by your side, you can manage the intricacies of regulatory compliance with confidence, unlocking new opportunities for growth and success. Bridgeforce can help you steer through these challenges seamlessly. Contact us.

 

[Editor’s note: this article was written by Anne Priester, who retired in 2024]

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