Regulatory Compliance Risk Management: Frameworks, Best Practices, & How to Do a Risk Assessment

  • May 14, 2024

Emily Bonnie

Senior Content Marketing Manager at Secureframe


Rob Gutierrez

Senior Compliance Manager at Secureframe

Regulatory compliance risk management is all about taking proactive steps to comply with the laws, regulations, and standards that affect your organization. Managing compliance is essential not only for avoiding legal penalties and fines but also for protecting your organization's reputation and enhancing its operational integrity.

Yet understanding and effectively managing compliance risks can be a significant challenge. Organizations have to navigate evolving regulations, manage variations in compliance requirements, and allocate adequate resources to compliance without hindering growth.

This article delves into the essentials of regulatory compliance risk management, explaining its importance, the common challenges organizations face, strategies to overcome these challenges, and a step-by-step guide on conducting a thorough regulatory compliance risk assessment for your business.

What is regulatory risk? Why regulatory compliance matters

Regulatory risk is the potential for new or changing laws and regulations to impact a company's business operations, profitability, or reputation.

Common examples of regulatory risk include:

  • Financial regulations: Changes in banking laws, securities regulations, or tax laws can affect how companies manage their finances, report earnings, and conduct transactions.
  • Environmental regulations: New or stricter environmental laws may require companies to invest in cleaner technologies or change their operational processes to reduce pollution and waste, impacting their costs and operations.
  • Health and safety regulations: Industries such as manufacturing, construction, and healthcare often face updates in safety standards that require new compliance measures, potentially leading to increased operational costs.
  • Data protection and privacy laws: With increasing concerns over data security, companies must comply with regulations like the General Data Protection Regulation (GDPR) in Europe, the California Consumer Privacy Act (CCPA) and California Privacy Rights Act (CPRA), and similar laws mandating how consumer data is handled and protected.
  • Employment laws: Changes in labor laws, including minimum wage, working hours, and benefits, can influence staffing and operational costs.

Managing regulatory risk is critical — and complex. Having a strategy in place to proactively anticipate and adapt to changing regulations helps organizations maintain operational stability and prevent disruptions to customers as well as avoid unexpected cost increases and financial strain. 

Fully understanding the regulatory landscape also helps businesses make more informed strategic decisions about entering new markets, expanding into new industries or customer segments, and developing new products or services. 

Regulatory risk vs compliance risk

While regulatory and compliance risk are closely related and often overlap, they are not exactly the same. 

Regulatory risk is about managing new or changing laws and regulations and creating a strategy to help your organization anticipate and adapt. 

Compliance risk involves avoiding the potential losses your organization could face by failing to adhere to current industry standards, internal policies, or best practices. This could include losing potential customers and investors, operational disruptions, or suffering a security breach. 

Overcoming the challenges of regulatory compliance risk management

The regulatory landscape is constantly shifting, making continuous compliance a major challenge for organizations.

Take data privacy as just one example. Between 2021 and 2023, seventeen new countries enacted data privacy laws, bringing the total to 162 globally — with at least twenty other countries having introduced new bills. And while the main intent behind these data privacy laws may be the same, the content of each regulation can vary significantly, making it extremely challenging for companies to understand their various compliance obligations and adhere to different legal requirements.  

Effective regulatory change management demands a significant amount of time and resources. Let’s explore a few recent statistics that paint a picture of the various challenges facing risk and compliance officers.

Complex regulatory environments

In 2023, almost 70% of service organizations said they need to demonstrate compliance with at least six different frameworks across information security and data privacy.

Regulations can vary widely depending on the industry, country, or even local jurisdictions. Keeping up with this complexity and ensuring compliance across different regulatory landscapes is challenging, especially for organizations operating in multiple geographies.

To determine compliance obligations, organizations consider industry-specific regulations as well as applicable laws impacting different locations the company operates in or the customers it serves. For particularly complex regulatory environments, some companies work with legal professionals or consultants to complete a regulatory compliance audit and identify all applicable laws and regulations. 

Changing regulations and compliance requirements

Laws and regulations can change frequently. In 2023 alone, the CPRA became enforceable, significantly amending the CCPA — and at least 40 states and Puerto Rico introduced 350 consumer privacy bills. Adapting to changes in the regulatory environment is time and resource intensive.

60% of businesses say they struggle to keep up with compliance and regulatory requirements, and 23% of security and IT professionals said staying aware of and interpreting new requirements and regulations was their top compliance program challenge.

Leveraging technology to monitor and flag new and changing regulatory requirements that affect your organization can give your team valuable time back and ensure nothing gets missed. Compliance software can provide alerts about legislative changes, regulatory announcements, and updates from industry bodies, and also help manage documentation, internal audits, and compliance training to ensure your organization stays compliant with new requirements.

Resource constraints

Adequately managing regulatory risks requires significant investment in terms of time, money, and personnel, and many compliance teams are still relying on costly manual processes. 76% of compliance managers say they manually scan regulatory websites to track changes and assess the impact on their organization.

Companies are challenged with allocating resources effectively to try and balance regulatory requirements with other business priorities. And recent statistics indicate they’re choosing to roll the dice regarding compliance regulations — 21% of organizations plan to do nothing to address framework revisions or updated requirements until a required audit or external party findings.

To avoid potential risks, regulatory compliance must be treated as an ongoing investment — one that fuels growth by building a competitive edge and supporting long-term sustainability.

Balancing resources between regulatory compliance and growth initiatives is crucial for organizations to both mitigate risks and seize opportunities for expansion. By closely aligning compliance activities with business goals, teams can tie their efforts directly to the organization’s overall growth strategies, such as market expansion or customer trust. 

Organizations can also implement tools that improve efficiency and effectiveness for compliance processes, automating routine tasks such as evidence and data collection, continuous monitoring, document management, personnel training, and reporting. This allows staff to focus on more strategic tasks that directly contribute to business growth. 

Stakeholder involvement

35% of risk executives say compliance and regulatory risk presents the greatest threat to their company's ability to drive growth.

Aligning a regulatory compliance risk management program with the overall business strategy is crucial yet challenging. Organizations need to ensure that their approach to managing regulatory risk supports their strategic goals and does not hinder growth or innovation.

While company stakeholders are building business strategies focusing on growth and profitability, compliance objectives prioritize mitigating risk and maintaining operational integrity. In some cases, compliance measures might restrict business activities, or strategic initiatives might bump up against regulatory boundaries. 

For example, consider a global tech company planning to expand its user base into a new geography to increase revenue. This expansion strategy must account for local data protection laws, which are stricter than the laws in the company’s home country. Implementing the necessary compliance measures, such as data localization requirements, would involve substantial changes to the company's data management systems, incur additional operational costs, and extend project timelines, which might not align with the aggressive growth targets set by the company.

As mentioned above, compliance initiatives can also be very resource-intensive, requiring ongoing investments in technology, training, and experienced personnel. While compliance ultimately drives growth in a significant way, it can be perceived as a cost center that diverts resources away from more direct growth initiatives. 

Compliance and growth shouldn’t be seen as competing priorities. To overcome this challenge, senior management must be involved in integrating the regulatory risk management strategy with the organization’s strategic goals. How might regulatory changes impact various aspects of the business? What can be done to ensure compliance efforts promote rather than hinder business objectives?

Third-party compliance issues

Different vendors may have varying levels of compliance standards, depending on their geographic location, industry, and company size. Ensuring that each vendor meets the relevant regulatory requirements can be complex and time-consuming, and organizations may not have the level of visibility they need to assess whether vendors are adhering to requirements. 

As regulations evolve, ensuring that all contractual relationships remain compliant with new laws and standards can also be challenging. Organizations can help mitigate this by including explicit compliance clauses in vendor contracts. These clauses should outline necessary regulatory standards and the consequences for non-compliance, as well as allow for regular compliance audits and assessments.

Implementing compliance management software can also simplify vendor management by storing vendor compliance documentation such as audit reports, completed security questionnaires, and due diligence notes in a single tool. The compliance software can track compliance across all vendors, map vendor compliance to address framework requirements,  and generate alerts for potential non-compliance issues.

Lack of visibility

Regulatory risk management often involves multiple departments including legal, compliance, IT,  finance, and operations. Ensuring these departments work together effectively to address regulatory risks can be a complex organizational challenge.

For example, without clear visibility, different departments might implement and enforce compliance policies inconsistently. A lack of transparency can also hinder the compliance team’s ability to fully understand its regulatory risk profile, resulting in undetected and unaddressed risks that leave the organization open to compliance violations. 

Using a centralized compliance management system can significantly improve visibility into compliance statuses, issues, and priorities, as well as standardize and enforce policies and processes throughout the organization — making critical information more accessible across the company. Dashboards and analytics tools can also provide real-time insights into critical risks and highlight potential areas of non-compliance before they become problematic.

It’s also essential to promote an organizational culture of compliance where employees feel encouraged to speak up about security and compliance issues and have dedicated channels or processes for doing so. Implement mechanisms for employees to provide feedback on compliance processes to enhance visibility and transparency across your organization. 

Manage potential risk with regulatory risk management frameworks

There are several risk management frameworks designed to help organizations manage risk and regulatory compliance. These frameworks provide structured approaches to identifying, assessing, managing, and monitoring regulatory compliance risks:

COSO Framework

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework is one of the most widely used for risk management, including regulatory compliance. It offers a comprehensive model for effective risk management that can be applied across industries and sectors.

The framework emphasizes five components: risk assessment, control environment, control activities, information and communication, and monitoring activities. It helps organizations design and implement sound internal controls for managing compliance risks.

ISO 31000

ISO 31000 is an international standard that provides guidelines on risk management. It is applicable to all types of risks, including regulatory compliance risks. The framework outlines principles and processes for managing risk that can help organizations increase the likelihood of achieving objectives, improve the identification of opportunities and threats, and effectively allocate resources for risk treatment.


Control Objectives for Information and Related Technologies (COBIT) is a framework primarily for IT management and governance. It is useful for organizations looking to manage compliance with data security and privacy regulations like GDPR or HIPAA. COBIT helps organizations ensure that IT processes are aligned with business goals, managed effectively, and provide optimal information and technology governance.

Basel Accords

For financial institutions, the Basel Accords provide a set of international banking regulations developed by the Basel Committee on Banking Supervision. These regulations involve risk management requirements that ensure financial institutions have enough capital to meet obligations and absorb unexpected losses.

When choosing a risk management framework for regulatory compliance, consider the following factors:

  • Industry-specific requirements: Some frameworks may be more suited to certain industries. For example, financial institutions might favor Basel Accords, while tech companies may benefit from COBIT.
  • Compatibility with existing practices: The chosen framework should integrate smoothly with the organization’s existing risk management strategy, cybersecurity practices, and business operations.
  • Scalability and flexibility: The framework should be scalable and flexible to adapt to the organization’s size, complexity, and changes in the regulatory environment.

These frameworks can help organizations establish a structured, consistent approach to managing regulatory compliance, leading to more informed decision-making, stronger risk management, and continuous compliance.

How to conduct a regulatory compliance risk assessment

Navigating the complex terrain of regulatory compliance is crucial for any organization wanting to safeguard its operations against legal penalties and maintain its reputation. Conducting a regulatory compliance risk assessment is an essential process that helps organizations identify, evaluate, and manage the potential risks of non-compliance with applicable laws and regulations.

The steps below will guide you through the process of conducting an effective compliance risk assessment, from defining scope and objectives to implementing controls.

1. Understand compliance obligations

First, you’ll need to understand your regulatory compliance obligations and specific regulatory requirements.

Use these questions to help outline your compliance landscape and determine which laws and regulations you’ll need to adhere to:

  • What industry does your business operate in? For example, finance, healthcare, and education each have specific regulatory requirements.
  • Do you operate locally, nationally, or internationally? Each geography may have its own set of regulations and enforcement bodies. 
  • Does your business handle consumer data or personally identifiable information? If so, what regulations must you comply with, such as GDPR in Europe or CCPA in California?
  • Are there industry certifications or standards that you need to maintain to satisfy customer expectations or remain competitive, such as SOC 2, ISO 27001, or NIST 800-53?
  • How do you stay informed about changes in laws and regulations?

2. Define scope

The next step is to identify which aspects of your organization are applicable for the risk assessment, based on the regulatory and security standards you need to adhere to. Consider factors like different product or service offerings, customer requirements, geographical locations, business units, and types of regulatory requirements.

It’s also helpful to define specific goals for the risk management process, such as identifying new compliance risks, evaluating the effectiveness of current compliance measures, or preparing for upcoming regulatory changes.

These questions can help you define risk assessment scope: 

  • Why is the risk assessment being conducted now? Is it due to new regulatory requirements, recent non-compliance issues, or as part of a regular review cycle?
  • Are certain locations, business functions, or departments more exposed to regulatory risk than others?
  • Do regulatory requirements vary by location or product?
  • Over what time period will the risk assessment be conducted? Is it meant to capture a snapshot in time, or will it cover a range of dates to observe variations in compliance risk exposure?
  • What is the potential impact (financial, reputational, operational) of non-compliance in the areas being assessed? How might this influence the focus or depth of the risk assessment?

3. Assess regulatory compliance risks

The next step in the risk assessment process is to identify where your organization’s policies and practices might not meet regulatory standards or where regulatory changes could impact your compliance posture.

To effectively pinpoint these risks, you can engage with stakeholders and ask targeted questions to understand compliance challenges and operational risks:

  • What compliance measures do we currently have in place? How effective are these measures in ensuring compliance?
  • What have previous audits revealed about our compliance status? Were there any gaps identified, and have they been addressed?
  • Are there any anticipated changes in laws or regulations that might affect our operations?
  • Which areas of our operations are most vulnerable to compliance failures?
  • Do our partnerships or supply chain relationships expose us to additional compliance risks? How do we monitor third-party compliance?
  • Do we allocate sufficient resources to manage compliance? Are our compliance teams adequately staffed and trained?
  • Do we have the necessary technology to monitor compliance and manage regulatory changes?
  • How are compliance issues reported within the organization? Is there a clear procedure for documenting and addressing these issues?
  • How quickly are compliance issues detected and resolved?
  • Are employees regularly trained on regulatory requirements? Is this training tailored to their specific role and responsibilities?

Assess the likelihood and severity of each identified risk. Consider both direct impacts, such as fines and legal penalties, and indirect impacts, such as reputational damage and operational disruptions. You can then prioritize the risks based on their severity and impact to focus resources on the most critical compliance issues.

4. Implement controls

Which internal controls can you implement to mitigate risks? This could include revising policies, enhancing training programs, implementing new technology solutions, or strengthening compliance oversight.

Assigning an owner to each identified risk and defining a risk treatment plan ensure accountability and make it easier to set clear responsibilities for risk mitigation, establish timelines for implementation, and define success metrics to monitor progress.

Ask these questions to help guide your control implementation:

  • What mechanisms, policies, and procedures do we already have in place? How effective have these been in ensuring compliance?
  • What areas of our operations have historically been prone to compliance issues? 
  • Are there recurring themes or specific incidents that highlight gaps or vulnerabilities?

5. Monitor, report, and improve

A shifting regulatory landscape and evolving business practices require organizations to continuously monitor their compliance posture and the effectiveness of implemented controls. Conduct regular internal audits and leverage compliance software to build an efficient regulatory compliance program.

It’s also essential to maintain proper documentation for senior management, the board of directors, and relevant regulatory bodies (if required). This includes risk assessments, policies and processes, internal audit findings, decisions made, and mitigating actions taken. Maintaining these documents will also reflect changes in the regulatory environment, the business model, or the operating context, ensuring that the organization remains compliant as circumstances change and continuous monitoring occurs.

Regulatory compliance risk management with Secureframe

Secureframe’s GRC automation platform is designed to help organizations effectively manage the complexities of regulatory compliance. Secureframe automates processes like continuous monitoring and remediation, evidence collection, policy management, risk assessments, and task management, reducing the time and effort it takes for organizations to understand how regulatory changes affect their existing compliance program.

Our team not only reaches out to notify customers of any regulatory changes affecting their compliance posture, but the Secureframe platform is also built and maintained by compliance experts. Any regulatory changes or framework updates are reflected in the platform, such as PCI DSS 4.0, ISO 27001:2022, NIST CSF 2.0, NYDFS NYCRR 500 amendments, and more.

A recent survey of Secureframe users by UserEvidence found that 95% saved time and resources obtaining and maintaining compliance, and 50% reduced costs associated with their compliance programs. 

Learn more about how our platform can help your organization streamline regulatory compliance management by scheduling a demo with a product expert. 

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What is regulatory compliance in risk management?

Regulatory compliance in risk management refers to the process of ensuring that a company adheres to all relevant laws, regulations, and standards applicable to its business operations. This involves identifying the legal requirements that the organization must meet and implementing strategies and controls to ensure compliance.

What is the compliance risk management process?

The compliance risk management process is a structured approach to identifying, assessing, managing, and monitoring the risks of non-compliance with applicable laws and regulations. It typically involves:

  1. Risk Identification: Determining what compliance risks exist
  2. Risk Assessment: Evaluating the severity and likelihood of these risks
  3. Risk Mitigation: Implementing controls to reduce or manage these risks
  4. Monitoring and Review: Continuously checking the effectiveness of these controls and making necessary adjustments

How to mitigate regulatory compliance risk?

To mitigate regulatory compliance risk:

  • Implement robust policies and procedures that align with legal requirements
  • Educate and train employees on compliance standards and their responsibilities
  • Use technology to enhance tracking, monitoring, and reporting of compliance data
  • Conduct regular audits to ensure policies are followed and effective
  • Stay updated on changes in legislation that affect your business

How to manage regulatory compliance?

Managing regulatory compliance involves:

  • Understanding applicable regulations and how they impact the organization
  • Developing a compliance program that includes policies, procedures, training, and monitoring mechanisms
  • Assigning compliance responsibilities to dedicated individuals or teams
  • Regularly reviewing and updating the compliance program to address new risks or changes in regulatory requirements
  • Engaging with regulatory bodies and staying informed about regulatory changes

What are key risk indicators for regulatory compliance?

Key risk indicators (KRIs) for regulatory compliance are metrics used to signal the increasing risk of non-compliance. Examples include:

  • Number of compliance breaches or violations reported
  • Audit findings that highlight non-compliance
  • Employee training completion rates
  • Changes in regulatory requirements that have not been addressed
  • Complaints or legal claims related to non-compliance

These indicators help organizations monitor their compliance status and act proactively to mitigate risks.