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Modelling compliance risk: a structured approach

Abstract

This article presents a structured and systematic approach for identifying and modelling compliance risks. The sophistication with which modern business is carried out and the unprecedented access to a global market means that businesses are exposed to increasing and diverse regulatory requirements in and across jurisdictions. Compliance with such requirements is practically challenging, partly due to the complexity of regulatory environments. One possibility in this regard is a risk-based approach to compliance, where resources are allocated to those compliance issues that are most risky. Despite the need for risk-based compliance, few specific methods and techniques for identifying and modelling compliance risks have been developed. Due to the lack of methodological and tool support, compliance risk identification often involves unstructured brainstorming, with uncertain outcomes. The proposed approach consists of a five-step process for the structured identification and assessment of compliance risks. This process aims at facilitating the identification of compliance risks and their documentation in a consistent and reusable fashion. As part of the process, the article provides a systematic approach for a graphical modelling of compliance risks, which aims at facilitating communication among experts from different backgrounds. The creation of graphical models can be partly automated based on natural language patterns for regulatory requirements. Furthermore, the structuring of the compliance requirement in a template aims at simplifying the modelling of compliance risks and facilitating a potential future automated model.

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Notes

  1. This is a working group composed of national data protection authorities.

  2. This is not merely a hypothetical claim. The authors have experienced a situation in which a 3-h meeting resulted in the identification of only one compliance risk. This problem stems from the lack of a structured approach for identifying compliance risks.

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Acknowledgments

This work has been funded by the European Commission via the RASEN (316853) project. Thanks are also due to our colleagues in the RASEN project for their comments throughout the project. We express special gratitude to our colleagues Fredrik Seehusen, Bjørnar Solhaug and Ketil Stølen at SINTEF ICT.

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Correspondence to Tobias Mahler.

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In Honour of Jon Bing.

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Esayas, S., Mahler, T. Modelling compliance risk: a structured approach. Artif Intell Law 23, 271–300 (2015). https://doi.org/10.1007/s10506-015-9174-x

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Keywords

  • Compliance
  • Risk identification
  • Legal risk
  • Graphical modelling
  • Compliance management
  • Natural language patterns