6 Steps of RCSA Automation & Standardization

What is RCSA?

Risk and control self-assessment (RCSA) is a procedure for assessing and examining operational hazards and the efficacy of risk management controls. The purpose is to ensure that all enterprise risk management objectives are fulfilled in a fair amount of time.
A facilitated RCSA can help a bank improve its control environment in the following ways:

• Raising awareness of corporate goals and the critical role of internal control in accomplishing them.
• Motivating employees to develop and implement control processes with care, as well as to continuously enhance operating control procedures.

Risk Control Self-Assessments (RCSA) are a critical part of risk management. The RCSA process requires risk stakeholders to perform self-assessments of the risks that affect their departments and the impact of the controls that have been put in place. RCSA reports enable management to keep an eye on the risk exposure of the organization and quickly mitigate any emerging risks.

RCSA Process

The RCSA process is critical for businesses in the financial sector. Risk and Control Self Assessments help businesses detect the problems that are occurring across the enterprise. The objective is to ensure that if there is a vulnerability in the risk framework or if a risk control is not performing optimally then it can be detected, and the issue can be resolved. The RCSA process is also instrumental in increasing risk awareness among employees. Including them in the assessment ensures that they are familiar with the factors that increase risk, which makes them more cautious.

There has been a lot of interest in RCSA automation due to the many benefits of the RCSA process. As a risk and compliance intelligence platform, Predict360 offers a unique approach to RCSA process and workflow modernization. Learn how automation increases the benefits while improving the overall self-assessment process.

• Step 1 – Document Control Environment
• Step 2 – Identification of risks
• Step 3 – Risk Evaluation
• Step 4 – Control Identification and Evaluation
• Step 5 – Corrective Actions
• Step 6 – RCSA monitoring

Step 1 – Document Control Environment

The first step of any RCSA endeavor is to document risks and controls for risk mitigation. Banks and other financial institutions typically take a manual approach to organizing this information. The Risk Manager compiles a master Word or Excel document of the regulation that requires an assessment. In this document, there is the Regulatory Risk, Controls, and a Risk Rating (scale of 1-5, for example). The Risk Manager sends out multiple variations of the spreadsheet or Word document to the business line managers.

Impact of standardization

RCSA automation solutions centralize the documentation process. Instead of every person documenting the risks and controls and then sending them to the Risk Managers to be manually recompiled, all data is managed in a central server where it can be shared with other employees. This provides a more streamlined and accountable method.

Step 2 – Identification of risks

Once all the processes and deliverables have been documented, the next step is to identify the risks which are linked with the activities, processes, and deliverables of the department. Such operational risks are usually identified by the managers of the department with help from their teams. They look at the results of audits, previous experiences, and external feedback to understand the negative possibilities associated with every action.

Impact of standardization

One potential risk in manually identifying risks is that the same risk may be listed by different employees or departments under different names since the employees have no way to see how others are classifying risks. This creates a blind spot for management because they cannot see the enormity of the risk. RCSA automation solutions standardize the risk taxonomy for the whole organization which allows executive-level employees to quickly identify significant risks affecting a large portion of the organization.

Step 3 – Risk Evaluation

Once the risks have been identified the next step is to evaluate them. Evaluation is a necessity because management needs to prioritize their understanding and risk reporting. If there is a risk that can cause significant harm to the business, then it needs to be dealt with before other risks. Each department’s management will evaluate the risks that affect their department based on severity.

Impact of standardization

Risk evaluation is often inconsistent because every person evaluates the risks based on their personal understanding. One person may evaluate risk differently than the other, which means that when the RCSA reports are combined the intelligence in them is often incorrect. RCSA automation solutions automate the workflow and give everyone with access rights the ability to collaborate on risk evaluations.

Step 4 – Control Identification and Evaluation

The controls that mitigate the risks also need to be identified and evaluated. This is easier than identifying risks because the controls have been put in place by the management thus there is no need to discover them.

Impact of automation

We see a similar impact of automation on this step as we did on risk identification and evaluation. The sharing of documents and collaborative features present in RCSA solutions ensures that the controls are evaluated fairly. The shared control taxonomy also ensures that the same controls are not listed multiple times under different naming schemes.

Step 5 – Corrective Actions

RCSA reports are created so businesses can detect and eliminate the vulnerabilities in the controls. Any significant finding will result in corrective action planning. These plans are put in place after evaluating and prioritizing the risks and controls across the organization.

Impact of automation

RCSA solutions make it easy to create action plans and follow-up on them. In the absence of an automated solution, these plans are carried out through email threads. It is possible to lose sight of something important because it got buried in the email inbox. RCSA solutions allow managers to create action plans directly from the interface where they view the results of the RCSA reports. This makes it easy for everyone to see the plans that need to be acted on. It also makes it easier to follow up on the action plans, because all the required information is available on a single dashboard.

Step 6 – RCSA monitoring

It is important to monitor the results of the RCSA reports coming in from across the organization. Businesses usually periodically monitor these results. This process is handled by the risk department.

Impact of automation

RCSA automation eliminates the need to manually monitor RCSA results. The assigned stakeholders get notified of any updates automatically which ensures that no important information is missed.

RCSA automation made easy

Streamlining and automating the RCSA workflow can not only reduce the amount of effort it takes to accurately perform self-assessments; it can also lead to greater competitive advantages with the right RCSA solution. Want to see how an RCSA solution will benefit your organization? Get in touch with our risk experts to request a demonstration.