Glossary: Cannabis Risk Management
A
Assurance
The continuous monitoring and testing of the risk management function that provides information to relevant stakeholders regarding the health of risk management functions across the commercial cannabis business
Adult use
Cannabis for sale to a consumer of legal age for personal consumption
Adult use sales
Cannabis products sold to a consumer through a facility such as a storefront or a retailer
Automated teller machine (ATM)
An electric telecommunication device that enables customers to perform financial transactions, such as deposits, withdrawals, transfer funds, and accessing account information
B
Board risk committee
An independent subcommittee of the board where a select number of board members are appointed for risk management oversight
Budtender
An attendant working behind the counter of a cannabis location
Business continuity
A formal plan ensures that a disaster does not severely impact the daily operations of the commercial cannabis business or significant unplanned events. Following a critical event, the business continuity plan allows the retail cannabis business to recover quickly and become operational.
Business strategy
The combination of decisions and actions taken to accomplish the business objective(s) is called the business strategy.
C
Cannabinoids
The chemical compounds unique to cannabis acts upon the human body’s cannabinoids receptors.
Cannabis
A tall upright plant with serrated hairs that produces three species of flowering plants; cannabis sativa, cannabis Indica, and cannabis ruderalis
Cannabis Risk Management Framework (CRMF)
A risk framework for which risks and opportunities can be identified, analyzed and influenced within the context of business objectives.
Cannatourism
The cannabis tourism industry
Cash management
The process of managing cash through collection and disbursement
CBD (Cannabidiol)
CBD is the abbreviation for cannabidiol, one of the naturally occurring cannabinoids found in cannabis
Code of ethics
An organization adopts guiding principles that describe the required ethical behavior for all personnel.
Compliance risk
An organization faces exposure to legal penalties, financial forfeiture, and material loss when it fails to act by industry laws and regulations, internal policies or prescribed best practices.
Concentrates
Cannabis-derived extracts that contain concentrated amounts of cannabinoids and terpenes by processing the cannabis plant to remove contaminants and less desirable parts of the plant
Control activities
The actions are taken to minimize risk while the commercial cannabis business strives to achieve its business objectives
Control Framework
A standard approach for managing risks across an organization
Control standard
Establishes the risk expectation of management to ensure the reduction of their risks
D
Direction of risk
The increase or decrease of risk over time
Diversion
The transfer of licensed cannabis products to the illicit cannabis market or the unlicensed use of a business process on an unlicensed cannabis product.
E
Edibles
Food infused with cannabis extracts
Extraction
The process of separating cannabinoids from cannabis plant material using chemical solvents or mechanical methods
F
Farming
The growing of cannabis according to the legal definition of hemp
H
Hash / Hash oil
Hashish, more commonly known as a hash, is derived from the resin of cannabis plants.
Hemp
Any part of the cannabis plant, including the seeds and all derivatives, extracts, cannabinoids, isomers, acids, salts, and salts of isomers, whether growing or not, with a delta-9 tetrahydrocannabinol (THC) concentration at or below the jurisdiction legal definition of hemp
Horizontal integration
Holding the same type of licenses in multiple jurisdictions
I
Identified concerns
Substantiated complaints from the public, recognized operational abnormalities by employees and identified deficiencies by regulators or auditors.
Illicit cannabis market risk
Illicit cannabis market risk is the exposure to legal penalties, financial forfeiture, adverse actions on a cannabis business license, or other material loss an organization faces if it is determined to be negligent or in conspiracy with illicit operators.
Illicit operators
Illicit operators are individuals or loosely associated groups operating outside of the law, primarily for personal financial gain. There is a simple hierarchical structure, a near absence of force, fear, or other coercion tactics regarding the seller-buyer relationship, and a decentralized supply chain inconsistent with organized crime.
Impact
An estimate of the potential losses associated with an identified risk
Information and communication
The iterative process of providing, sharing, and obtaining organizational knowledge with relevant stakeholders
Infusion
The act of incorporating either cannabis extracts or plant material into another product
Inherent risk
The level of risk that the commercial cannabis business is exposed to without the implementation of control activities
Inversion
The transfer of unlicensed cannabis products to the legal cannabis market
Internal control environment
The set of standards, processes, and structures that provide the foundation of the company culture
J
Jurisdiction
The geographic area in which a political authority is recognized
L
Looping
Looping is the practice of evading legal cannabis purchase limits by procuring cannabis products at or below the legal limit repeatedly during a limited time period to obtain an illegal amount of cannabis product.
M
Management control structure
Establishes ownership and responsibility consistently across management
Manufacturing
The process of combining, compounding, extracting, blending, infusing, making and preparing cannabis products
Marijuana
Cannabis grown not according to the legal definition of hemp
Medical use
Cannabis for sale to a medical patient for personal consumption
Medical use sales
Cannabis products sold or transferred to medical patients through a facility such as a dispensary
Medical vs medicinal
Medical cannabis is when the smokable plant is prescribed while medicinal cannabis is when cannabis is used in an OTC prescription drug format
Minor
A person below the age of adult use, even if they are eligible through a medical cannabis program.
Money laundering
The process of making illegally gained proceeds (“dirty money”) appear legal (“clean”).
Money laundering risk
The exposure to legal penalties, financial forfeiture, and material loss an organization faces if it is found complicit in money laundering.
O
Operational risk
The exposure to legal penalties, financial forfeiture, and material loss an organization faces if it chooses unsuitable business decision(s)
Organized crime
A crime enterprise specifically profiting from illicit activities and goods with corrupt measures.
Organized crime operators
Organized crime operators are closely associated groups operating outside the law, primarily for the organization’s financial gain. There is a well-defined hierarchical and management structure, greater operational sophistication, and they use coercive tactics to maintain their ongoing criminal activities.
Organized crime risk
The exposure to legal penalties, financial forfeiture, economic loss, and material loss an organization faces if it is perceived negligent or in conspiracy with organized crime
Ounce
A unit of measurement to describe 28 grams
P
Packaging
Placement of finished cannabis product into a container and marked for consumer sale
Policy
A board-approved document prescribing a set of principles that guide the commercial cannabis business decisions in order to achieve business objectives
Procedures
Documentation that describes how (step by step) to perform an activity and/or accomplish an objective
Process
An activity that is performed to accomplish a risk control activity
Q
Quality of controls
The effectiveness of controls to mitigate risk
R
Residual risk
The risk remaining after the control activities have been applied to an inherent risk
Risk
The exposure to factors that impact the commercial cannabis business’s objective
Risk appetite
The level of risk a business is willing to accept to attain business objectives.
Risk area
A segment of risk that is material enough to have its risk drivers
Risk assessment
Process of evaluating risks that could affect the achievement of business objectives with a focus on the likelihood and magnitude of impact
Risk culture
The system of values, actions, and approach by the organization for addressing risk
Risk driver
The set of critical factors that significantly influences where a risk issue will be present
Risk issue
Example of a risk to which a commercial cannabis business is commonly exposed
Risk management
The process of identifying, assessing, prioritizing, and controlling risks to minimize the impact of threats and maximize opportunities
Risk management program
The set of risk-related policies and procedures delegated to the employee
Risk mitigation
Action that is taken by a business to reduce the risk to a level that is within the risk appetite
Risk officer
A qualified person appointed by the board with the appropriate responsibility and authority to oversee the implementation of the risk program
Risk policy
Documentation of the risks involved in performing your business activities. Because any activity can have some risk involved, commercial cannabis businesses create a risk policy as a way of defining those risks. It should set the companies expectations of risks to be managed, who is ultimately responsible for management of the risks, and to what outcome.
Risk profile
The outline of the entire risk landscape that is the catalog, types, and potential effects of risks to which a commercial cannabis business is exposed
Risk program
A structured process to identify potential risks and the development and implementation of a strategy for minimizing or mitigating the impact of these risks.
Risk steering committee
A management committee formed by the Board of Directors or equivalent committee
Risk strategy
Integration of business objectives with risk management techniques
Risk tolerance
The specific amount of risk an organization is willing to accept from its defined risk appetite per business objectives
Root cause
The principal reason for the occurrence of a problem
S
Segregation of duties
Two ore more individuals who are responsible for completing different parts of a task within the same process, so no individual can complete the entire process without the involvement of other individuals
Shrinkage
The loss of inventory that can be attributed to factors such as employee theft, customer theft, vendor fraud, damage in transit or in-store, or counting or recording errors
Stakeholder
Any individual or entity that has an interest in the organization or may be affected by the organization’s actions; including investors, employees, suppliers and vendors, and customers
Straw buyer
A person who purchases cannabis on behalf of another
Structuring
Structuring means breaking up a large cash transaction into small cash transactions to disguise the true amount of cash involved in the transaction.
Supply chain
The network of all the individuals, organizations, resources, activities and technology involved in the creation and sale of a product, from the delivery of source materials from the supplier to the manufacturer, through to its eventual delivery to the end-user
Supply chain risk
The exposure to reputational risk and material loss an organization faces if it is associated with a negative supply chain event
T
Terpene
Aromatic oils that give cannabis distinctive flavors
THC
Delta-9-tetrahydrocannabinol, more commonly known as THC, one of the naturally occurring cannabinoids found in cannabis
Tincture
A cannabis extract in liquid form
Topical
A cannabis product where the cannabis active properties are extracted and combined into skin products, such as lotion
Track and trace regulatory framework
The laws and regulations that are implemented to enable regulators to monitor the production of cannabis from the initial state to a desired state before allowing non-licensed customer access
Training
The development of skills pertaining to the application of and knowledge of risk policies and practices relevant to the board, employee, and stakeholder’s role or position
Transportation
The temporary storage and transfer of cannabis or cannabis derivatives from one physical location to another by means of a vehicle, ship, or aircraft
V
Vendor
A company or person offering a product or service for sale
Vertical integration
Holding multiple types of licenses in the same jurisdiction
Disclaimers: Marijuana remains illegal under U.S. Federal Law. It is legal by state law in various areas and certain countries worldwide. We recommend you review your local laws. We do not endorse the illegal use of marijuana in any shape or form.
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