- Managing risks is an ongoing process that requires continuous attention especially with the current economic environment.
- Designing processes of risk management is vital as it allows organizations to proactively identify and mitigate potential risks, reducing the likelihood and impact of potential failures.
- Automating controls in a continuous manner is fundamental as it reduces human errors and provides real-time monitoring and alerts for potential risks.
In 2022, the world faced significant economic and geopolitical challenges, including inflation, transactional complexities resulting from the Russia-Ukraine crisis, and disruptions to global supply chains. These factors created loopholes that could increase the risk of fraud. 2023 needs a different governance approach!
Given the uncertainty and fast pace of change in the past year, organizations need to be prepared for anything, including the unexpected, and build their resilience by establishing defined impact tolerances in advance. This requires adopting a new approach to continuous assurance. In fact, organizations must not only manage this uncertainty but also manage changes in policies and regulations/requirements that can significantly alter the organizations duties, responsibilities, and accountability.
For instance, the SEC has recently announced a vast bevy of new rules, reforms, and requirements that mandate increased oversight and ensure that organizations disclose more information about their business operations and financial performance, maintain robust compliance frameworks, fight against fraud and corruption, and build additional transparency and accountability. A fair amount of these new reforms and rules are meant to ensure that investors have access to the information they need to make informed decisions.
This increased focus on financial accountability, mixed with the emergence of high volumes of uncertainty and volatility, increases the risk of fraud, as it creates an environment where mistakes and intentional wrongdoing are more likely to occur. For example, desperate and overloaded teams might find ways to cut corners performing operations, while bad actors might find opportunities to exploit that desperation or lack of resources. To summarize, lack of oversight and disparate operations create an environment that creates favorable conditions for risky behavior. In fact, according to a recent Gartner report, 47% of internal auditors struggle keeping pace with the expanding risk universe with stagnant or reduced resources.
This has put the spotlight on the need for organizations to maintain strong financial accountability, with a focus on preventing fraudulent activity. As a result, governance and internal control take on greater significance and without proper measures in place to identify and prevent risks and fraud, organizations may face significant financial losses.
This is where the importance of reliable and automated governance tools delivers greater value for ongoing assurance. As such, finding a way to automate and fool-proof governance practices can provide tremendous value. Automation allows real-time monitoring for continuous compliance and assurance, enabling immediate actions and not months later.
Automated solutions can provide controls and standardization in areas where human input can be manipulated or altered, minimizing areas where small details can be skewed or overlooked. Additionally, automating difficult or tedious tasks can free up existing resources to allow them more bandwidth in areas where human oversight is necessary.
In light of the challenges companies faced in 2022 and the increased risks in 2023, it is clear that a new approach to risk management is needed.
Risk Mining is a revolutionary approach that emphasizes the importance of discovering actual financial processes rather than relying on manual activities to describe them, analyzing the data and automatically detecting all actual risks in near real-time. Using Risk Mining, internal auditors can continuously monitor all business processes, allowing them to manage risks regardless of changes within and outside of the organization.