Key controls are the primary procedures relied upon to mitigate a risk or prevent fraud. Non-key controls are considered secondary or back up controls. All controls can be grouped into one of the four components of internal control: Control environment. Risk assessment.
A key control is an action your department takes to detect errors or fraud in its financial statements. It is expected that departments have their processes and controls documented. Your department should already have key financial review and follow-up activities in place.
Key controls are the primary procedures on which your organization relies to mitigate risk and prevent fraud. They are the first and most indispensable line of defense. Key controls often cover multiple risks or support the execution of a process. They are usually part of high-level analytical controls.
Let's look at the different types of controls that can be used for risk treatment. A simple diagram of 4 boxes showing there are 4 types of control directive, preventative, detective and corrective. Directive is shown as being the weakest form of control; preventative is shown as the strongest form of control.
The basic methods for risk management—avoidance, retention, sharing, transferring, and loss prevention and reduction—can apply to all facets of an individual's life and can pay off in the long run. Here's a look at these five methods and how they can apply to the management of health risks.
Leading & lagging KRIs
Leading KRIs are measures that are considered predictive in nature. They are derived from metrics that can help to forecast future occurrences. Lagging KRIs are metrics based on historical measures. These help to identify trends in the firm.
Key risk indicators are metrics that predict potential risks that can negatively impact businesses. They provide a way to quantify and monitor each risk. Think of them as change-related metrics that act as an early warning risk detection system to help companies effectively monitor, manage and mitigate risks.
You use KPIs to monitor various areas of your contact center and make more accurate predictions. KRIs measure an outcome that has already happened. They are business outcome-based measurements. For example, reviewing revenue would be considered a KRI.
Areas of control:
Control includes inventory management, quality control and equipment control. Human resources: Control includes selection and placement, training and development, performance appraisal and compensation.
Key controls are part of transactions processing, often manual or semi-automated. Tests of automated application controls. Application controls are built into the auditee's systems and are applied to individual transactions or to batches of similar transactions.
Key controls are those that must operate effectively to reduce the risk to an acceptable level. Secondary controls are those that help the process run smoothly but are not essential.
The control objectives include authorization, completeness, accuracy, validity, physical safeguards and security, error handling and segregation of duties.
A simple way to differentiate key vs. non-key controls is to ask the question: “what risk does this control mitigate, and is the risk low or high?” If the risk is low, the control may not be needed. Use this approach to prioritize your efforts.
While KPIs help organisations understand how well they are doing in relation to their strategic plans, KRIs help them understand the risks involved and the likelihood of not delivering good outcomes in the future. This means KRIs can be the flipside or KPIs.
Examples of controls may include testing, periodic internal audits or inspections, and even your training program. Your risk assessment will determine what risks are present in your company and what controls need to be placed to protect your assets.
These controls fall into three categories: detective, preventative, and corrective.
The score is calculated by a sum of the multiplication of each attribute priority and weighted answer. The best possible score is 100. There are 10 attributes; if each attribute were equally prioritised at the maximum value of 10, and each answer was the fully weighted answer of 1.00, this would yield a total of 100.
Effective key risk indicators (KRIs) account for external and internal factors that impact a company's reputational exposure, such as various stakeholders, key drivers and cross-cutting enterprise risks.
These risks are: Credit, Interest Rate, Liquidity, Price, Foreign Exchange, Transaction, Compliance, Strategic and Reputation.
Risk control methods include avoidance, loss prevention, loss reduction, separation, duplication, and diversification.