The RCSA operational risk assessment process is used to identify and evaluate operational risks, and gauge the effectiveness of the organization’s controls in managing those risks. As such, it provides multiple benefits for organizations, from improving the effectiveness of controls to increasing business efficiency.
Full Answer
Risk and control self assessment (RCSA) is a process through which operational risks and the effectiveness of controls are assessed and examined. The objective is to provide reasonable assurance that all business objectives will be met.
RCSA is one of the most important tools in a firm's operational risk management and control framework. Its purpose is to enable a firm to manage and monitor its key operational risks and controls, overall helping to reduce the risk of adverse events occurring.
The aim of the risk assessment process is to evaluate hazards, then remove that hazard or minimize the level of its risk by adding control measures, as necessary. By doing so, you have created a safer and healthier workplace.
“Risk Assessments: In a risk assessment, often referred to as a Risk Self Assessment (RSA), a bank assesses the processes underlying its operations against a library of potential threats and vulnerabilities and considers their potential impact.
A risk and control assessment is the process by which organisations assess and examine operational risks and the effectiveness of controls used to circumnavigate them.
Continuing with our earlier example, the three types of risk monitored by RCSA tracking unit will be as follows: A RCSA sheet for Risk Management processes in a bank is provided as an example in the annexure. RCSA is used for tracking important or materialistic risks only.
Benefits. Control self-assessment creates a clear line of accountability for controls, reduces the risk of fraud (by examining data that may flag unusual patterns of transactions) and results in an organisation with a lower risk profile.
Risk and Control Self Assessment StepsIdentify business objectives.Identify operating model.Identify the risk.Assess the risk (using likelihood and impact)Evaluate against the appetite.Identify issues and actions.Monitor and review.Incident Management.
Step 1: Preparation. Preparation begins by clarifying the purpose of the control self-assessment. ... Step 2: Process review. It is essential that the review team develop an understanding of the way the processes and activities are conducted. ... Step 3: Improvement opportunities. ... Step 4: Improvement actions.
What is the primary objective of a control self-assessment (CSA) program? Explanation: Audit responsibility enhancement is an objective of a control self-assessment (CSA) program.
Step 1 - Document Control Environment. The first step of any RCSA endeavor is to document risks and controls for risk mitigation. ... Step 2 - Identification of risks. ... Step 3 - Risk Evaluation. ... Step 4 - Control Identification and Evaluation. ... Step 5 - Corrective Actions. ... Step 6 - RCSA monitoring.
HOW OFTEN: - There are varied opinions on how often RCSAs should be conducted. My take would be that the frequency should depend on the risk profile of an institution and the business activities it undertakes. The most common period being quarterly assessments, with others going for monthly or semi-annual.
The RCSA operational risk assessment process is used to identify and evaluate operational risks, and gauge the effectiveness of the organization's controls in managing those risks. As such, it provides multiple benefits for organizations, from improving the effectiveness of controls to increasing business efficiency.
HOW OFTEN: - There are varied opinions on how often RCSAs should be conducted. My take would be that the frequency should depend on the risk profile of an institution and the business activities it undertakes. The most common period being quarterly assessments, with others going for monthly or semi-annual.
Step 1 - Document Control Environment. The first step of any RCSA endeavor is to document risks and controls for risk mitigation. ... Step 2 - Identification of risks. ... Step 3 - Risk Evaluation. ... Step 4 - Control Identification and Evaluation. ... Step 5 - Corrective Actions. ... Step 6 - RCSA monitoring.
There are three different types of risk:Systematic Risk.Unsystematic Risk.Regulatory Risk.
The risk control and self-assessment (RCSA) methodology have certain characteristic features.
The risk control and self-assessment (RCSA) process does not take place at the organization level. Instead, as a part of this process, organizational units are identified. The policies are implemented and the success is monitored at the unit level. The organization-wide risk control and self-assessment (RCSA) is just the sum of the different units in the company
Controls and risk mitigation plans are set up for materialistic risks. Each entity is responsible for managing its own risks and developing an action plan. Risk entities are supposed to have multiple plans in place. This is because if a particular plan does not work, then it can be replaced with a different plan.
The end result of this process is that risk entities are constantly engaged in risk management activity. In many organizations, a dashboard is maintained where the risk levels of various units are constantly monitored. Thus the risk control and self-assessment (RCSA) framework helps in mitigating operational risks.
It is important to note that this process is continuous and must be done periodically. Risk controls that are effective today may not remain effective after a certain period of time. As a part of this process, companies also have to set up methods that will help use samples to determine the effectiveness of the plans.
The operational risk manager has to periodically monitor the RCSA, including the results of testing and corrective action tracking. Maintain evidence of this monitoring.
Select key process owners and staff involved in the process to participate based on the objectives and scope of the RCSA exercise. It may also be desirable to include other key stakeholders in the workshop, such as key customers and suppliers to the business unit or process. The participants and the appropriate management levels must understand the RCSA process. They must recognize, and be committed to, the potential benefits and value of the process.
The RCSA workshops are usually facilitated by an internal (or external) auditor who is familiar with the processes, activities, risks, controls of the entity.
Document control weaknesses that exist and take appropriate and prompt corrective action. Corrective strategies need to be developed and timelines to address the risk where the level of risk is not acceptable needs to be set. The risk owner has responsibility for the action plans developed. Sufficient testing or other procedures must be performed to provide reasonable assurance that controls adequately address risks and is functioning as intended. The important components of the corrective action plan must include: 1 Name of the business line. 2 Name of a responsible officer for the business line. 3 Date of test and test period covered. 4 A clear description of each control weakness. 5 Action plan to resolve the deficiency. 6 The target date for a resolution that is both reasonable and achievable. 7 Rating of the issue severity.
The facilitated self-assessment approach involves gathering management and staff for workshops relating to, and discussion of, specific issues or processes. It is used as a mechanism to assess informal, or soft, controls as well as traditional hard controls.
The risk owners are responsible and accountable for determining whether the level of residual risk is acceptable, or whether there is a requirement for additional risk treatments.
The survey or questionnaire approach is often used if the desired respondents are too numerous or widely dispersed to be readily brought together for a workshop. They are also preferred if the culture of the organization might hinder open, candid discussions in workshop settings or if management desires to minimize the initial time spent and the cost incurred in gathering the information. Self-assessment questionnaires can be produced as an outcome of facilitated workshops, with the intention of using the questionnaires as a means of following up on agreed workshop outcomes, or as a means for management to help maintain and monitor effective internal controls on a permanent basis.
The Risk Control Self Assessment (RCSA) is one of the “primary tools typically used to assess inherent operational risks and the design and effectiveness of mitigating controls” (Office the Superintendent of Financial Institutions, Operational Risk Management Guideline – E-21). In Principles for the Sound Management of Operational Risk (Bank for International Settlements (BIS), 2011), the RCSA is described as:
A self-assessment without question captures how well the business leader understands the risks. On the negative, an RCSA can only capture what is known, the RCSA can be a lot of work do to, and the RCSA competes with other risk assessments and with internal audit for management’s time. The most significant challenge I see with RCSA is management’s ...
An RSCA which is has become a bureaucratic annual process of ticking the boxes is of low value and probably increases the risk profile by lulling managers into believing they understand the risks. The RCSA does not need to be like this.
There is little point running an RCSA on a periodic basis unless the data tells us that something has changed. The key to a sustainable RSCA process is in how we use the data to identify changes in the risk profile of a specific process, and then use the RSCA to investigate these changes and determine what changes need to be made to the controls.
The solution, in the long run, is to view the RCSA as an “investigative tool” not an identification tool.
Risk Management is complex. There are a large number of risk types recognized today, particularly under the umbrella of Operational Risk. Each of these risk types has growing bodies of “expert knowledge” supported by an ever increasing suite of certifications and growing knowledge bases to describe the risk and describe the control options. In the face of this, we must question the ability of the first line of defence, a business leader focused on sales or operations, to be familiar with each and every one of these risks in enough detail to complete a self-assessment.
Too often, the RCSA has become a low value add regulatory requirement. If we don’t provide value to management, we will undermine risk management, not make it better.
Risk and control self-assessment (RCSA) involves identifying, recording and assessing the risks that
Risk and control self-assessment (RCSA) involves identifying, recording and assessing the risks that