The term risk management audit is an amalgamation of two terms, risk management, and audit. Here audit refers to mainly internal audit. Internal auditors help companies develop and enhance the procedures and controls related to compliance, governance and risk management within an organization. Risk management refers to the process that helps to recognize and record the risks and dangers that are associated with the organization. It is also done to help try and find solutions to mitigate those threats. Whether the risk management role of a company is based on conventional insurable risks or broader enterprise-wide risk management, a risk management function audit should be among the top priorities for a chief audit executive.
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1. Risk Management Audit Checklist
2. Operational Risk Management System Audit Checklist
3. On-Site Risk Management Audit Checklist
4. Operational Risk Management Audit Checklist
5. Risk Management Strategy Audit Checklist
6.Sample Risk Management Audit Checklist
Reasons to Conduct Risk Management Audit
1: Develop Ideas for Future Internal Audit Plan
Generally, there’s no better place to start when designing top-down, risk-based internal audit plans than looking at what the organization’s risk management role has defined as key risks, particularly if the business has an enterprise risk management program. These programs generally include regular evaluations identifying and evaluating emerging or essential threats. It is the responsibility of the board or the senior management to set risk appetite and sensitivity. The risk owners then decide how to handle and track risks.
2: Ensures That the Surprise Activities Are Handled Properly
Most risk mitigation activities deal with incidents that, if not handled properly, could seriously threaten the organization. The insurable risks include natural disasters, disturbances to the supply chain, industrial accidents, workplace illness or injury, and similar others. Risk events such as these are high impact but low chance events. In other words, even though the stakes are high for these events but the likelihood of them ever occurring is small. This may be good but it gives rise to a greater need for objective confirmation since there are no test runs.
3: Ensures Implementation of High Level of Rational Control to Address Main Risks
Mid-level executives often dismiss the need to handle these risks due to time constraints and short-term financial pressures, because they have never encountered one. The chief auditors understand the struggle of working with scant information and are familiar with the process of obtaining objective input from external resources.
4: Helps to Develop a Fresh Look to Keep Pace With the Progress in Organization
Most organizations grow, expand their geographical reach, create new business units or services, introduce new channels of sourcing or distribution or introduce new technologies. Now and then it is important for those managing risk and insurance schemes to step back and examine why things are the way they are, and whether they are still effective. Promoting this level of critical thinking through an internal audit is the best way to encourage this.
5: Helps to Verify the Insurance Policies That Provide the Necessary Coverage
When business agreements are made the general rule is to fully document or record the terms of the deal. But this rule does not apply to the insurance industry. Several months go by before the buyer gets to know about the purchase of the insurance policy. Extension plans are often submitted only days before the effective date of the extension, leaving no room for substantive analysis. Specimen policy terminology is often not issued unless requested.
Steps on How to Audit Risk Management
Step 1: Plan for Applicable Requirements by Mapping
There are set standards and frameworks for different organizations for conducting an audit of risk management. And such kind of audits need pre-planning and preparation. These preparations need to be done per the set standards and frameworks for that organization. It needs to be customized according to the particular sector and the circumstances presented by the particular systems or environment of information technology. The auditors are required to apply their professional expertise to ensure that the audit program includes all the proper information and tests.
Step 2: Adapt to Nature of Audit and Goals
Further adjustments about audit scope and objectives should be considered after aligning the system with industry standards and requirements. Generally, the required number of predefined controls are already mapped to the required numbers of control objectives. These control objectives discuss IT risk control and structure, management procedures, recognition of incidents, evaluation and response, and remediation action plans maintenance and monitoring.
Step 3: Optimize Monitoring and Budget Alignment
Once the significance and comprehensiveness of the above-mentioned control objectives have been confirmed, the auditors can proceed by identifying existing controls and potential weaknesses with a preliminary analysis of IT risk management processes. Assessing the inherent and residual risk for each process helps prioritize those areas that require the greatest attention and budget. To simplify the coordination process the auditors might take different steps. For example, auditors may group controls for governance and IT risk management framework tests together.
Step 4: Test Controls
This step involves the process of testing and it is one of the most laborious and difficult steps among all. While reviewing the different control objectives such as the governance or the IT risk management system, the auditors would need to make sure that the monitoring and review of the IT risk management system are being done regularly. This, in turn, will help to define the IT risk appetite of the organization. The organization will then identify and enforce the IT risk response for each defined danger.
Step 5: Present the Results
After finishing the process of testing controls, the whole view of the IT risk management program will be available to the auditors comprehensively. This includes its incorporation into the foundation; the general structure, duties of key contributors and similar others. Once the results are received, the same should be published.