Automating RCSA for Enterprise Risk Management
RCSA (Risk Control Self-Assessment) reports are critical to managing and mitigating risks across the organization but are often challenging to conduct and report on efficiently. The RCSA process requires each business unit to complete self-assessment reports and submit them to risk managers, who then often combine the multiple evaluations to report on overall enterprise risk.
The Challenges of Manual RCSA Processes for Enterprise Risk Management
With a manual process approach, each business unit completed and delivers its RCSA report in the form of a document or a spreadsheet. This leads to several inefficiencies, such as:
- Inconsistent risk ratings across business units
- Non-standardized control and risk taxonomy
- Subjective versus objective evaluations
- Disorganized approach and duplicate controls
- Outdated data
Inconsistent risk ratings across business units
Since every business unit evaluates risks and controls as they relate to individual business lines, the same risks may be assessed and rated differently across different business units. This applies to both residual and inherent risks.
Non-standardized control and risk taxonomy
Different business units may be reporting on the same risks and controls using different terminology. This can result in overlap and confusion when the reports are being evaluated and rolled up into an enterprise risk report. The risk manager must subjectively interpret the evaluations or ask for clarification from different business units, resulting in additional effort.
Subjective versus objective evaluations
Risk evaluations are subjective because these are largely handled by each business unit’s manager. Without standardized set of evaluation criteria, business units either independently evaluate assigned risks or collectively decide how to evaluate the risks and controls.
Disorganized approach and duplicate controls
Decentralized RCSA data approaches – sending different segments of spreadsheet and/or Word documents to different business units – leads to disorganized data and additional effort. It can also result in duplication of controls, effort and potential inaccuracies.
By the time the business unit reports are evaluated and rolled up the data is often outdated. Without a real-time data approach for RCSA processes and reporting, risk and compliance stakeholders are only able to evaluate and advise on historic data, rather than emerging risks.
The benefits of RCSA automation for enterprise risk management
Automating the RCSA process workflow can achieve many benefits. It is important to understand what automating RCSA means in this context. It is not possible to automate the risk assessment itself; we need risk managers to evaluate the risk based on different factors and understand its severity. That is the advantage of automating the RCSA process – it gives the risk managers more time to spend and get better results from evaluation. Here are some of the benefits you can expect from using an RCSA solution:
- Standardized risks taxonomy and ratings
- Shared control library
- Automatic collection and collation of reports
- Task management
Standardized risk taxonomy and ratings
An RCSA solution features a common risk and control taxonomy that can be used by the whole organization. Instead of every business unit defining its own risks and controls, every risk that has been defined goes into a central database. If any other business unit also faces the same risk, they can simply select the risk already present in the database. This means that all the items associated with one risk can be viewed in one place. The risk ratings are also shared between the business units.
RCSA solutions also have a shared library for controls. This allows management to see how each control is performing in different business units and diagnose any process related issues that may be causing inefficiencies.
Automatic collection and collation of reports
The standardization of risk and control taxonomies enables the RCSA solution to easily combine the reports and collate the data and analyze it for enterprise risk management. Since all the same risks and controls are linked, management can easily see how each risk is affecting different business units, how different business units are managing risks, how controls are shared between departments, and many other insights. The RCSA solution also takes the risk ratings across departments and generates risk ratings for the whole enterprise.