Compliance and risk performance is often measured by the financial penalties or losses that were prevented or realized; however, relying on this set of metrics can hide a more comprehensive view of risk and compliance program management. Compliance management and risk management are both complex domains, and one cannot simply judge their performance by the number of failures avoided or recorded. Sometimes professionals overestimate their ability in a limited assessment of risk and compliance performance which can hide many faults as well as successes.

In order to evaluate an organization’s risk and compliance performance more holistically, an organization must also identify and appraise key metrics that aid risk and compliance. It requires metrics that not only identify what is going well, but also what is going wrong so that corrective actions can be understood and acted upon before they become serious.

Measuring the performance of risk and compliance technology

Another factor that has increased the importance of risk and compliance management metrics in recent years is advances in risk and compliance technology. While there are many offerings, assessing the impact of the risk and compliance technology can be very complicated. How does a business calculate ROI on a technology implementation without metrics? One choice is to wait until the whole financial year is over and judge the performance based on the reduction in compliance violation related penalties and risk management related losses, but no business wants to wait a year before being able to assess ROI on an implementation level.

Metrics allow businesses to judge the impact of the technology objectively. The metrics should be recorded before the implementation, which will work as a baseline to see how much improvement was recorded by risk and compliance technology.

A quality risk management system will improve the accuracy of risk predictions. This metric measures the severity gap between what was expected and the outcome of the actual risk. Click To Tweet

Measuring compliance management efficiency

Any compliance management system in an organization – whether it is manual or being run through a compliance management software solution – can be assessed by the following metrics:

  • Mean time to issue discovery
  • Mean time to issue resolution
  • Compliance expense per issue

Mean Time to Issue Discovery

The ‘’mean time to issue discovery’’ metric assesses the ability of an organization to discover compliance related issues. If the mean time to issue discovery is too high, it indicates that the fault in the compliance management framework is in the compliance monitoring domain. A good compliance management system (CMS) will show a significant improvement in detecting compliance issues. Many CMS also have automated compliance monitoring, which can result in immediate discovery of issue detection.

Mean Time to Issue Resolution

Compliance management systems shouldn’t help only with issue discovery – they must also have a significant impact on the time it takes to resolve the issue. If the mean time to issue resolution is too high, it indicates that the problem lies in the compliance team’s ability to investigate issues and implement corrective actions. Compliance management solutions streamline the workflow for compliance activities and introduce process automation; both factors contribute heavily to making it easier to resolve issues.

Compliance Expense Per Issue

The ability to calculate the ROI is essential to evaluate the performance of any new implementation. Many businesses hesitate with adding risk and compliance technology because of a perceived effect on risk and compliance budgets. However, if a risk and compliance management solution offers many “off the shelf” functions that need to be configured versus customized, it will reduce impact on risk and compliance technology expenses.

Key Metrics for Improving Risk and Compliance Program Performance

Measuring risk management efficiency

The performance of the risk management framework of an organization can be similarly assessed with meaningful metrics such as:

  • Severity gap between predicted and actual risks
  • Undetected risks
  • Risk mitigation timeframe

Severity Gap Between Predicted and Actual Risks

Being able to judge the severity of a risk and planning accordingly is an essential part of risk management. A quality risk management system will improve the accuracy of risk predictions. This metric measures the severity gap between what was expected and the outcome of the actual risk. It is perilous to think that a risk has low severity only to find out later that it should have been taken more seriously after the fact. Likewise, it is also inefficient to incorrectly evaluate a risk as having high severity only to realize later that the impact is small.

Undetected Risks

This metric asks a simple question – how many risks did the risk management framework fail to detect? This can be measured at the end of the quarter or year, when the business is able to assess all the impacts caused by the actualization of expected risks. Any risk that blindsides risk and compliance stakeholders is a breakdown in risk management.

Risk Mitigation Timeframe

The risk mitigation timeframe metric measures the time between the discovery of a risk and implementing the changes necessary to mitigate the risks. While the previous two metrics deal with identifying and predicting risks, this metric focuses on an organization’s ability to make the necessary changes within an acceptable timeframe.

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Choosing the right metrics for your organization

These are just some of the metrics that can be useful in evaluating risk and compliance performance. Additional metrics can be created depending on the nature of the business, and many industries have unique metrics that pertain to it. The size of a business can also affect which metrics are important for management. Generally, these metrics are important because they allow a business to track and monitor risk and compliance progress and detect any problems before they cause any serious damages.

If you are looking for a risk and compliance solution that helps your organization, improve compliance levels, mitigate risks, and lower costs then Predict360 is the solution you’ve been looking for. Get in touch with our team for more information or schedule a demo of the solution.