Both internal and external personnel can be involved in the processes associated with risk assurance, so financial controllers often play a key role in helping their companies assess, navigate, and minimize risk. Risk assurance solutions can help a business identify weak points and refine its processes moving forward.
In this article, we’ll cover the basics of risk assurance and explain how today’s leading companies are approaching risk assurance with a multi-tiered approach.
What Is Risk Assurance?
Many companies already operate some form of assurance practice. Though based on accounting, assurance departments tend to be broad and cover a variety of internal processes. Risk assurance is therefore a subset of this broader goal and tends to be much smaller.
Risk assurance auditors have a narrow focus, working to identify and manage events to optimize a company’s core processes. Risk assurance can therefore vary by industry and a company’s broader overall objectives.
Risk assurance is more than mere damage control. Those working in risk management can play an important role in helping a company to evaluate its internal systems and come up with solutions that improve efficiency from the ground up.
For controllers and financial employees, this means working in small teams that often partner with other areas of the organization to align all processes with the company’s core mission, searching for areas of weakness to improve along the way.
Adopting a Multi-Tiered Strategy
There are many approaches to risk assurance in the modern business world. Many of today’s leading companies are adopting a multi-tiered approach, seeking to integrate multiple areas of assurance and compliance into a comprehensive strategy that minimizes risk and highlights areas of growth.
Controllers should be familiar with critical areas that include:
Management and Internal Controls
Every company assesses risk differently, which is why risk assurance might be driven by industry-specific demands. Management plays a critical role in the process, since it is the senior levels of management that help to define a company’s overall goals, objectives, and corporate vision.
Understanding these goals is critical for every employee, but for the risk advisory personnel in the financial department, it can be foundational.
When controllers and other financial staffers understand the company’s big picture, it can be easier to discern the hurdles that prevent those objectives from being realized, just as it becomes easier to create processes that ensure success.
Additionally, companies can use their own internal controls to establish protocols to prevent deviation from their key objectives. Budgeting decisions, for example, can be leveraged to ensure that all departments are in alignment with the company’s broader vision.
Many times, this can be an iterative process, wherein leadership continues to refine the organization’s goals in light of industry advancements and economic changes. Controllers will therefore need to learn to adapt to these evolving needs to better serve their parent company and provide oversight to its financial health.
Financial Control and Security
Controllers exert considerable influence over a company’s finances, often second only to the CFO. Therefore, financial departments can set up processes to establish secure, reliable solutions that mitigate risk.
For example, in a company that relies on cloud-based computing technology to handle financial data, controllers can investigate solutions that provide greater control while protecting sensitive data from a security breach.
Having total access to your company’s data can allow you to create accurate reports and pinpoint problem areas in real-time. This level of financial control can help controllers to be more proactive, communicating about necessary changes immediately, rather than delaying action until damage has been done.
Inspection, Compliance, and Internal Audit
For many companies, these are the areas in which the rubber meets the road, financially speaking. Inspection, compliance, and auditing processes are aimed at examining a company’s past performance and looking for areas of weakness or failure to comply with company, industry, or legal standards.
In some cases, this area of risk assurance involves ferreting out problems such as human error, fraud, or lax reporting standards. When these issues are spotted, controllers can take action to offset any potential legal complications that come from these threats.
The auditing process can also be useful to review and refine existing policies and procedures. By clearly communicating standards and improving workflows, controllers can reduce risk and ensure that existing protocols and practices are in line with the company’s core values and mission.
Adapting to Evolving Needs
Given the dynamic conditions of the modern business climate, it’s likely that financial employees will need to remain adaptable. By intentionally seeking out opportunities to assess and address potential threats to a company’s financial health, financial professionals protect the businesses that they serve.
In the end, controllers can play a valuable role not only in mitigating sources of risk, but also in streamlining a company’s processes to safeguard a profitable future.
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