Risk Management & Internal Audit
Get a Consultation
Risk management is a practice, for organizations as it involves recognizing, evaluating and minimizing risks. It plays a role in ensuring corporate governance and helps businesses achieve their objectives.
The primary goal of risk management is to identify and understand the risks that an organization may encounter. By doing strategies can be developed to mitigate these risks while continuously monitoring their effectiveness. Risk management should be integrated into all aspects of an organizations operations forming a process.
There are types of risks that businesses may face, such as risks, operational risks, compliance risks and reputational risks. The specific challenges faced by each company will vary based on factors, like industry, size and activities.
The risk management process typically involves the steps;
- Identification of Risks; this step involves identifying all risks that the organization may face.
- Risk Assessment; here each risk is evaluated in terms of likelihood and impact.
- Risk Mitigation; Strategies are developed to reduce the likelihood or impact of each identified risk.
- Risk Monitoring; Regular review of risks takes place with updates made to the risk management plan as necessary.
Internal auditing is an impartial activity that aims to enhance an organizations operations by providing assurance and consultation. It employs an disciplined approach to evaluate and enhance the effectiveness of risk management, control and governance procedures.
The primary objective of auditing is to offer assurance to the board of directors and senior management regarding the effectiveness of the companys risk management, control and governance processes. Additionally internal auditing provides consulting services to support the organization in improving its risk management, control and governance practices.
Typically the internal audit function reports directly, to either the board of directors or an audit committee. This reporting structure ensures that internal auditing remains independent and objective.
The usual process, for conducting an audit typically involves the steps;
- Planning the audit; this step involves identifying the objectives of the audit developing an audit plan and obtaining managements approval for the plan.
- Conducting the audit; During this phase evidence is collected, evaluated and used to form an opinion on the effectiveness of risk management, control and governance procedures within the organization.
- Reporting the findings; this step entails communicating the audit findings to management. The board of directors.
- Follow up, on the findings; It is important to ensure that management takes actions to address any issues identified during the audit.
How Risk Management and Internal Audit Work Together
Risk management and internal audit are carefully associated disciplines. They both play a critical position in assisting groups to become aware of, investigate, and mitigate dangers.
Internal audit can help to ensure that the business enterprise's chance management procedures are powerful. This may be done by means of:
- Conducting chance tests to pick out and assess the agency’s dangers.
- Providing guidelines on the way to improve the organisation’s danger control strategies.
- Monitoring the effectiveness of the company’s risk control processes.
Risk management can help to identify dangers for internal audit to cognizance on. This can be performed with the aid of:
- Regularly communicating with internal audit about the agency’s dangers.
- Providing help to inner audit at some stage in its threat checks and audits.
By running collectively, danger management and inner audit can help agencies to improve their capability to pick out, verify, and mitigate risks. This can assist businesses to enhance their performance, reduce their losses, and defend their belongings.