Risk assessment is, of course, the foundation of effective compliance measures. This has always been true as a matter of common sense. And, since the revised Federal Sentencing Guidelines for Organizations went into effect 10 years ago this November, this has been true as a matter of legal expectation.
Risk assessment is also, in my view, the most challenging aspect of C&E work – both conceptually and as a practical matter. Indeed, even though I’ve been writing this column for four years (the fruits of which are contained in this complimentary e-book issued by CCI), I can see no end of risk assessment topics in sight. So, to attempt to chip away at the backlog, this most recent installment will look at some of the recurring questions C&E officers have on risk assessment methodology.
What’s the scope?
In theory, the scope includes all C&E risks that a company faces, but in practice, care should be taken to avoid going over ground that may have already been covered by targeted risk assessments into discrete areas, such as trade controls or health and safety. On the other hand, this should not be seen as an all-or-nothing issue, because even where such targeted risk assessments have been conducted previously a general risk assessment can often still contribute to promoting compliance for the risk areas in question by identifying cultural challenges (e.g., lack of accountability, difficulty employees have in raising C&E issues) that can diminish C&E “performance” with respect to risk areas of all kinds.
What is the best method of obtaining risk-related information?
The main options are, of course, individual interviews, workshops or surveys/questionnaires. Overall, I’d recommend interviews – since, understandably, some employees won’t raise sensitive matters with colleagues present. On the other hand, having one or two active participants in a workshop could draw out others – particularly if one can create a competitive sense about the process, so that participants feel they should show that they have a sophisticated understanding of compliance issues in the company. So, often the choice comes down to an estimation of how the individuals in question would likely perform in each of the two formats.
The advantage of surveys over both of the other two methods, of course, is quantitative – as presumably one can reach the most employees this way. But the downside is that surveys run a higher likelihood than the other methods of participants providing information without really understanding the issue (particularly in relatively complex issues like competition law compliance).
Should one challenge participants in interviews if their answer seems to be wrong?
I do so only if they clearly don’t understand the question itself, but not if what is wrong is that they misapprehend the nature, likelihood or impact of the risk. For instance, and sticking with the example in the immediately preceding paragraph, if a participant says that the impact of a competition law violation is likely to be minimal, that information – while clearly wrong – is still helpful, as it suggests a need for training for this risk area. But if the answer suggests she doesn’t grasp the difference between competition and corruption laws, then that should be corrected.
What’s the right balance between quantitative and qualitative risk information?
It depends on the main purpose of the assessment. If one is principally trying to understand risks, then the qualitative information tends to be more useful – particularly in identifying risk-specific scenarios or “the risk around the corner.” But if the principal goal is to secure support (time, money) for C&E initiatives for which risks are already known, a qualitative approach tends to be more helpful.
Of course, most assessments have both kinds of goals – and need both kinds of information. For C&E professionals facing circumstances like this, the question, of course, is finding the right blend of the two.
Jeffrey M. Kaplan is a partner in the Princeton, New Jersey office of Kaplan & Walker LLP (
