Big change - like complying with sweeping Regulation F requirements or adding new tech - brings new, risky gaps in your collections compliance procedures. To avoid surging lawsuit, regulatory, and revenue risks and find those gaps, creditors and agencies need the best tool for the job: a risk and gap assessment.
If your organization - large or small - hasn't done a risk and gap analysis on your collections practices in some time, you’re losing money: either to consumer attorneys (or yikes…a regulator), through uncaptured funds or to plain old waste. Do you know all of the gaps in your Compliance Management System that open the door to lawsuits or regulatory risk? How about those that result in wasted time, energy, or resources? What about gaps that may seriously impede your company's ability to capture as much revenue as possible?
So, how much revenue are you willing to lose?
Here's are 3 reasons why a risk and gap assessment should be in your 2022 plans:
- reduce legal and regulatory exposure (in other words, save you money);
- find gaps in your processes which lead to waste in your organization (in other words, it will save you money); and
- identify areas where you can improve to capture more revenue (in other words it will help you find more money).
1. Reduce legal and regulatory exposure
An ounce of prevention is worth a pound of cure
The Consumer Financial Protection Bureau (CFPB) Supervision and Examination Manual makes clear that risk assessments are a critical component to a financial institutions Compliance Management System.
Organizations across the industry made technology advancements (more on that below), changed workflow processes, and implemented new policies and procedures because of Regulation F. It’s now critical to ensure that those changes didn’t unintentionally create new risks. If your organization does not review them, the door is wide open for consumer attorneys and regulators to find them. A risk assessment will help you find these issues before it affects your bottom line.
2. You’ll find gaps in your processes which lead to waste in your organization
No matter how much effort your organization puts into its policies, procedures and training, things can break down over time. Additionally, as new client requirements, regulatory requirements and legal updates are added to existing procedures, gaps and redundancies can be created.
Do you know if your collection team and back office are doing what they're supposed to do? Does it make sense for them to continue doing it this way? Are all the steps of their process captured? Do you have redundancies? If you are not looking at your processes and procedures then how are you aware of any of these issues
3. It will help you identify areas where you can improve to capture more revenue
Technology is constantly evolving. It sometimes seems like new ideas are brought to the marketplace almost daily. Are you aware of everything your staff is doing? Do you know about each step they take in performing a particular task? Are there gaps in your procedures which can be solved through technology? Looking at your procedures to find these gaps can help your organization truly find the technology that’s right and therefore maximize your potential.
Here's the bottom line:
Gap and Risk assessments provide organizations with a tangible way to discuss compliance and operational risks. They help find areas where your organization can improve and create a dialogue that facilitates mutual understanding of the organization's risk tolerance level. By remediating areas of high risk, you create a document trail that is viewed favorably by regulators. As an added bonus, this exercise also helps you maximize your recoveries.
Regardless of whether you choose to complete a risk assessment internally or externally it’s important that you make resources available and make it a priority this year.
Two Great Ways to Learn More about Risk and Gap Assessments
1. Sign up for A Complete Guide to Risk and Gap Assessments (March 16th at 2pm ET). In this new, free, ultra-practical webinar and roundtable from insideARM and Research Assistant, you'll learn what you can expect from a good risk and gap assessment, plus, find out:
How to test
How to break an assessment into manageable chunks and assign responsibility
How to win support from operations
How to build towards ongoing audits
2. Get in on the new, 2022 risk and gap assessment workshop when you join Research Assistant. Are you looking for practical guidance on how to FIND THE GAPS IN YOUR CMS? Need to know how to win support for an assessment from c-suite execs and ops? Want to know how to build towards ongoing audits?
With the Research Assistant risk and gap assessment workshop, you'll get access to regular discussions on assessment best practice and strategy plus planning tools you can use to chunk out, organize, and track your own assessments.
Sara Woggerman, head of the iA Research Assistant and President of ARM Compliance Business Solutions also contributed to this article.