Monitoring And Review: The Proper Monitoring And Review Process

Monitoring and review. The organization reviews risk management activities and procedures in a variety of ways. In certain regulated firms, a full-fledged risk management function with a specialized Chief Risk Officer is developed (CRO). A team of risk management professionals is assigned to the CRO to identify and analyze the risks to which the organization is exposed. The risk management function collaborates with other departments and enables functions within the company to identify current and developing hazards. 

Monitoring And Review

Monitoring And Review

Risk management specialists undertake process evaluations, system testing, and process and operational observations. Furthermore, they are well-versed in the industry and regulatory regulations that apply to the firm.

The risk management function prepares and consolidates the risk inventory in coordination with the entity’s departments and supporting functions. The risk inventory acts as a consolidated database of the hazards to which the company is exposed.

Top risks at the corporate level are recognized and separated from the detected risks. Top risks at the company level are those that have significant financial and probable implications from both an inherent and residual risk assessment standpoint. These are key risks for management and the Board of Directors, and they are frequently monitored from a control standpoint. Such risks can result in significant financial, reputational, and operational losses. 

Cyber Security Risk

Cyber security risk, for example, is a high risk at the firm level since a cyber-attack on the organization’s system may result in the payment of ransom money, the loss of consumer sensitive information, unfavorable media news, etc. Therefore, a cyber security risk is always considered a top risk for any organization.  

Money laundering risk is another example of a high risk at the corporate level. Money laundering is a major concern for these highly regulated businesses that deal with public monies, such as brokerage houses, banks, and other financial institutions. Money launderers may exploit the financial system to conduct money laundering, resulting in sanctions and reputational damage for such financial institutions. 

In addition to the relevant process owners, the risk management function monitors all significant and top risks on a priority basis. All relevant hazards are recognized and aggregated for frequent and periodic control monitoring and testing. Any occurrence involving top risks has a severe financial and reputational effect. The Board of Directors also analyses the top and important risks on a regular basis and the mitigant measures implemented by management to avoid the occurrence of such controls. 

Risk Management Function

The risk management function consolidates the significant operational, regulatory, financial, reputational, legal, health and safety risks and report such significant risks to the management and the Board of Directors for their review and establishing the necessary mitigation strategies.

The whole risk management practice implemented in the organization is also reviewed by the third line of defense by the internal audit function. Internal audit checks the operating effectiveness of internal controls in different departments and functions.

Test Of Controls

As part of a test of controls, the internal audit team reviews the activities of the risk management function. Internal audit checks whether the risk management team is enabled and performs the required risk management activities across the organization. The internal audit checks the adequacy of identified risks, and the related steps taken to address the identified risks are considered by the third line of defense. 

Final Thoughts

Monitoring is the process of gathering and analyzing relevant data on a regular basis to ensure that you are accomplishing your goals. It usually occurs on a continuous basis, but data sets may be collected at regular intervals, such as quarterly.

When you review the results of an evaluation, you decide whether anything needs to be changed. Monitoring data may also prompt a review of a small part of your work, but a comprehensive review can only happen after a thorough evaluation of your effectiveness. A review may occur once a year or at the conclusion of a longer-term project.

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