“Risk management” was a much-used keyword search in 2020 during at the start of the global pandemic.
A much greater focus, going-forward, will be how risks can truly disrupt the businesses from working towards their objectives. Risk audits can be a valuable business-tool to ensure risk management processes are acting as intended and response-strategies are meeting expectations.
These audits are defined as the examination and documentation of the efficacy of the risk responses with regard to dealing with known risks, including their root causes. It also investigates the efficacy of the overall risk management structure and process. Risk management as a process is only valuable if it drives positive actions in mitigating unexpected events and helping address vulnerabilities that can expose the business to adverse events.
Reinforce Decision Making
When conducting any type of audit, it is the overall goal to discover weaknesses in processes and/or systems for rectification. These weaknesses can otherwise turn into risk sources, inching closer to a future problem that nobody wishes. Risk audit findings can reinforce confidence in the board and senior leaders on managing risks across the enterprise.
These processes can be a great tool of empowerment and motivation to leaders. Seeing the fruits of your labours in assessing, treating, and monitoring risk response strategies is a great way to help the risk-aware culture plant the seeds of success throughout the organisation.
Reinforcing decision quality on treating risks gives the board the assurance they need to pursue strategic objectives and move the organisation forward.
Provides Organisational Feedback
The purpose of an audit is not to punish or embarrass any one person or business division, it is a tool of improvement. Nobody likes to be told they need to improve in one area, or they are lacking in another, as it will often cause pain. However, candid feedback is what is needed to motivate the organisation on what is going right and what needs some fine-tuning. This organisational feedback helps drive the business forward.
Senior leadership can show their commitment to risk management when they communicate and allocate the resources required to address the risk audit findings. This shows leadership is serious about risk management and sees it as a value-add process for everyone in the organisation.
Watching the Film
The results of a risk audit will provide observations and recommendations to strengthen current risk response strategies and ensure the risk management process is being implemented correctly.
A risk audit allows boardrooms to gain hindsight and evaluate what is going well and what is in need of some further attention. Changing past behaviours involving the assessment of risk is a great strategy to help drive a risk-aware culture and protect the business from the impact of adverse events.
As risk audits continue over time, their reports can be evaluated to see how priority-risks over the years have been mitigated and moved around the “heat map”. This provides added context helping future audit analyses to be richer in providing insights on year over year risk performance.