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Risk and control self-assessment (RCSA) is an internal procedure used to identify, assess, and mitigate operational risks within a company.1
In this article, we will discuss the purpose and benefits of this process, before exploring the key stages involved in conducting a thorough RCSA.
Regular engagement in RCSAs allows businesses to effectively identify and mitigate operational risks.
Key Benefits Include:
An RCSA is a versatile tool that can be adapted to assess the unique risks faced by businesses in any sector. For example, financial services might face credit, market, compliance, and operational risks, and technology companies must navigate risks relating to cybersecurity, including intellectual property breaches. Healthcare providers may face additional clinical and informational risks, and are strictly regulated by industry specific laws and regulations like HIPPA.
During an RCSA, operational risks for a business are identified, and current risk management strategies are evaluated.
Once the current control measures have been assessed, any ineffective risk management processes can be finetuned and re-assessed.
The RCSA process is usually comprised of the following stages.
The best RCSAs start with a thorough top-down analysis of a business’ operations.1
This early step in the process is not about identifying or mitigating risks. Instead, it is about setting up a structure that allows the company to complete the next stages methodically and thoroughly.
During This Stage, a Business Will:
This is the stage in which risks are pinpointed by the organizational units defined in the first step.
Tools to Identify Risks
Questionnaires and workshops can be excellent ways to gain solid qualitative and quantitative data to underpin the findings of an RCSA. A business may host workshops in which stakeholders can meet to identify and discuss current risks. They may also distribute questionnaires across the company to gain a range of perspectives on risks from individuals at every level.1
Many businesses choose to combine these two data collection methods. This allows for a more thorough assessment that puts less of a burden on individuals.1 Once all risks have been identified, they should be categorized according to severity. Typically, severity is based on how much monetary value is at stake as a result.
Consider Risks in the Following Order:
In this stage, current controls being used to mitigate the risks identified in stage two are carefully assessed, with any gaps and shortfalls being identified.1
Assessment of controls should be carried out regularly, as even the most effective controls will not necessarily remain effective indefinitely. Risk control measures are often categorized as acceptable, acceptable with concerns, or less than acceptable based on their level of efficacy. It is up to each entity to manage its own risks and develop appropriate control plans.
Once existing risk controls have been identified and assessed, a business will have a clear picture of where improvements need to be made. Control measures that fall short of acceptable should be refined by the relevant entity to improve their efficacy going forward. Risk controls can be refined with a corrective action plan.
A Corrective Action Plan Typically Includes:
The final stage in an RCSA is to evaluate the new mitigation plans and controls introduced using corrective action plans.
New measures can be categorized by efficacy in the same way that initial controls are categorized in stage three (e.g., acceptable, acceptable with concerns, or less than acceptable). These standardized ratings offer a benchmark that helps teams constantly improve risk control. To get a dynamic picture of how a mitigation strategy’s efficacy is fluctuating over time, these ratings can be compared to the average of its last three scores.
The best RCSAs are iterative and regularly repeated to ensure the current data always accurately reflects the present picture. This allows any additional mitigation strategies needed to be introduced early, reducing risks to the business.
RCSA is a valuable tool for businesses wishing to be more proactive in mitigating risks and staying in line with industry regulations. The best RCSAs are methodical, dynamic, and set up to be constantly updated by organizational units. This ensures no risks go unchecked over time, and can ultimately boost a business’ financial prosperity for years to come.
1 https://www.logicmanager.com/resources/erm/a-guide-to-rcsa/
2 https://www.metricstream.com/learn/6-critical-factors-to-modernize-your-rcsa.html
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