Jurisdiction over U.S. export controls span several government agencies. Understanding and applying these rules requires the active involvement of multiple departments and functions across a company or other institution. And while most U.S.-based enterprises understand the need to comply with U.S. export control regulations, doing so as a practical matter can prove extremely challenging.
Companies and institutions face risks in nearly everything they do, and exporting is no exception. Accordingly, if yours exports items abroad, or if it plans to in the future, it’s critical to understand the universe of actual and potential risks you face—and then take appropriate action. That said, what would a sound strategy for identifying potential gaps in your export compliance program look like? Where would you start? What steps should you include? And how should you prioritize risk mitigation once gaps are identified, given limited organizational resources?
These questions all lead to one common solution: an export compliance risk assessment.
At the Export Compliance Training Institute (ECTI), we work with business professionals every day to help them comply with U.S. export controls. We understand that your company’s success is predicated on ideas, initiative, timing, persistence and execution. Yet, if you are the person in your organization who’s responsible for handling export compliance issues and ensuring successful compliance, you need to get it 100% right. Failure to achieve compliance could put your organization at unnecessary risk of financial penalties, and non-compliance can also result in substantial loss of time, money and effort.
In this regard, an export compliance risk assessment is an essential component of any export compliance program. At its most fundamental level, this assessment is a systematic analysis that looks across an entire enterprise—or in some cases, a specific department or process. Its purpose is to arrive at a common understanding of real or potential compliance gaps and then recommend remedial actions. Specifically, there are five key elements:
- Stakeholder engagement and participation
- Data analysis, where actual numbers are formulated and guide decision-making
- Documentation of gaps and mitigation plans
- Prioritization of corrective actions
- Measurement/tracking of improvement
Though it’s not a regulatory requirement for U.S. exporters, the primary export control regulators – the Bureau of Industry and Security (BIS) and the Directorate of Defense Trade Controls (DDTC) – highly recommend risk assessment as a means to identifying and quantifying existing and potential risks, and closing them based on strategic prioritization. Moreover, it can and should be undertaken at any stage in your exporting journey—whether it be early on in compliance program development, the midlife of that development or at any point following its completion. A risk assessment is also a valuable asset when it comes time to perform and report voluntary self-disclosures, which can help to mitigate or even eliminate fines and other penalties associated with non-compliance.
The Failure Mode and Effects Analysis (FMEA) – A Pathway to Risk Assessment Success
There are many approaches to risk assessment. One option is the use of the Failure Mode and Effects Analysis (FMEA) tool, which helps guide stakeholders through the risk assessment process step by step—specifically, documentation, prioritization and remediation.
Once risks – real or potential – are identified, the FMEA is used to assess factors that contribute to them. Numbers corresponding to (1) the degree of severity; (2) the likelihood of occurrence; and (3) the ability to detect the risk are then assigned to each risk, which yields a net risk score.
From there, the additional questions below help to prioritize these risks:
- How bad is it if it occurs?
- What are the chances of it occurring?
- If it did occur, how would anyone in the company/enterprise know?
The higher the risk score, the greater the risk, so using both quantitative and qualitative measurements helps stakeholders develop a logical framework for remediation. And once that plan is in place, it’s time to get busy. Taking action means identifying a clear owner of the remediation process, specifying all associated activities, identifying associated challenges and assigning milestone dates for completion and/or reporting.
It doesn’t end there. An export compliance risk assessment is not a document intended to gather dust; rather, it’s a living, breathing tool that should be used as a foundation for continuous identification of risks and improvement.
One final note: A successful export compliance risk assessment should be 100% supported by executive leadership and actively championed by key stakeholders. Export compliance is complex and challenging—but it’s in everyone’s interest, so support must be strong and organizational in scope.
For a deeper dive on all this, we encourage you to view our on-demand webinar, “5 Key Elements to Export Compliance Risk Assessments.” Additionally, all our e-seminars include compliance program modules with discussions of risk assessments and audits. We offer an array of on-demand content that highlights risk assessment, including:
- How to Improve Export Compliance With Effective Audits
- Risk-Based Self-Assessment as a Critical Element to Measure Risk, Performance and Improvement
We hope this article highlights the benefits of an export compliance risk assessment for your company or organization—and the primary components of a successful assessment. Your company’s investments rely on achieving total compliance with all applicable export regulations and controls. That said, it is absolutely achievable—you can do it, provided you take the necessary time up front to align with an established and widely acclaimed export compliance training partner who can guide you step by step toward compliance success.
Do you have questions about export compliance risk assessments or other export compliance challenges? Visit www.learnexportcompliance.com to learn about our company, our faculty, our staff and our esteemed Export Compliance Professional (ECoP®) certification program. To find upcoming e-seminars, live seminars and live webinars and browse our catalog of 80-plus on-demand webinars, visit our ECTI Academy. You can also call the Export Compliance Training Institute at 540-433-3977 for more information.
Scott Gearity is President of ECTI, Inc.