The rapid expansion of licensed medical and retail cannabis markets across the world, coupled with the staggering amount of regulation surrounding licensed cannabis markets, has created a major problem for commercial cannabis businesses to remain compliant and reduce their reputational, administrative, civil, and criminal risk.

Many highly-regulated industries with a similarly complex regulatory and reputational image to manage use a risk-based strategy to control cost while reducing their risk exposure. Risk-based strategies allow the industry participants to focus resources and time on the issues most likely to damage the industry market or individual participants. By focusing all industry participants on the highest risk issues affecting the industry, the industry participants are able to apply scales of economy to identifying best practices and tools that meaningfully increase the safety and soundness of the market.

Given the complexity of licensed cannabis markets, simply producing SOPs at the time of licensing application will not yield ongoing compliance. Further, a commercial cannabis business must mitigate multiple risk areas such as money laundering, illicit cannabis market, compliance, supply chain, and operational to best mitigate its exposure to negative reputational, administrative, civil, and criminal outcomes. Since commercial cannabis and ancillary cannabis businesses face significant economic losses due to these risks, it benefits all industry participants to understand and implement a risk management strategy to reduce their risks. The Cannabis Risk Management Framework (CRMF) uses a similar risk management approach to financial institutions, pharmaceuticals, food manufacturing, and other highly regulated industries. The CRMF consists of 6 components: the internal control environment, risk assessment, control activities, information and communication, training, and assurance that provides a repeatable strategy to manage risk that is recognized by regulators and prosecutors.