In this series of posts, we’ll dive a little deeper on threats and risks, how they apply to your financial crime compliance program, the regulatory demands, and how Section 2’s Hybrid Threat Finance analysis can help.

Now in Part 2, let’s talk about Risk Assessment and how they are pivotal in financial crime compliance.

A risk assessment evaluates the likelihood and impact of those threats materializing within your institution’s specific context. It considers inherent risks, controls in place, and residual risk across business lines, geographies, products, and customers.

• Your institution’s exposure to identified threats
• Control effectiveness (policies, procedures, tech, people)
• Gaps and vulnerabilities
• Prioritization of mitigation efforts

The key output of a risk assessment is a structured understanding of where your greatest exposure lies—and what you’re doing (or failing to do) about it.

For example, a bank’s annual Enterprise-Wide Risk Assessment (EWRA) should be a detailed, institution-specific exercise that incorporates national threat assessments and internal control evaluations.

Section 2’s Hybrid Threat Finance (HTF) is a foundational element of Risk assessment because it explains and helps you identify the external threats to your business – it analyzes how threat actors—whether criminal groups, trafficking networks, cyber adversaries, terrorists, or even hostile nation-states—exploit financial infrastructure to achieve their objectives.