RCSA stands for Risk Control Self-Assessment. RCSA is a risk control process to help identify, assess, evaluate, and manage risks using a self-assessment approach. Organizations use the RCSA control process to assess and evaluate the effectiveness of their internal risk controls that are key in mitigating risk. It involves all individuals in an organization. Once an organization identifies areas of improvement, it can implement changes to enhance its risk management practices.
Phases
Risk Identification
To be effective, an RCSA process should have scope; that is, it should identify several boundaries such as business units, business areas, goals and objectives, and the identification and selection of relevant stakeholders. An RCSA process typically involves the following steps: risk identification, risk assessment, control design, control testing, evaluation of existing controls, risk monitoring, risk reporting and communication.
In this step, an organization identifies potential risks that may be impacting its objectives. This activity, conducted with key stakeholders from scoped areas, involves brainstorming sessions, interviews, workshops, checklists, review of historical data analysis, to name a few, and systematically identifying, and documenting risks.
Risk Assessment
Once an organization identifies risks that may be impacting its objectives, potential risks are subsequently assessed (analyzed and evaluated) for the likelihood of occurrence, impact of risk, and severity of risk using various qualitative and quantitative techniques. During this step, stakeholders typically prioritize risks and develop appropriate strategies to manage them.
Control Design
Controls are developed, if none exists, to align to risks. If existing controls do exist, they are aligned with the identified risks. What are controls? Controls are key procedures with action items that would help mitigate risks and ensure compliance with regulatory requirements, internal requirements, and policies. Each identified risk should be matched with a control.
Control Testing
To be effective, controls should be tested to ensure they are operating as intended. Controls are typically tested using simulations, sample testing, walkthroughs, and data analysis. Control testing helps in identifying weaknesses or gaps in the controls. Control testing helps in making improvements to enhance existing controls.
Evaluating Existing Controls
Existing controls are continuously evaluated to ensure they are adequate and operating effectively. Evaluating controls is necessary to identify any weaknesses or gaps, by assessing their control design, implementation, documentation, monitoring and testing. Once gaps are identified, action plans should be generated to address them. Gap analysis may involve project management work to identify areas that need improvement and develop appropriate work components.
Risk Monitoring
Risk monitoring of controls is necessary to ensure continued effectiveness. Periodic monitoring should be implemented using risk reporting and key risk indicators. Risk monitoring should be an on-going process to track and evaluate new and existing risks, while ensuring current risks do not become issues. KPIs, risks registries, and risk reporting can be used to monitor risks.
Risk Reporting and Communication
Communicating risks is very important. Risks should be documented, reported, then communicated to relevant stakeholders. Communication includes updates and status of risks, impact, and actions to mitigate them.