As businesses are charged with processing increasingly large amounts of data to meet the demands of today’s economy, data analytics is proving to be immensely valuable in the risk, compliance and audit functions.
From better insights into risks and controls to improved assurance coverage, data analytics in risk management can help your organisation to identify and monitor risk in a unified, optimised manner. In fact, tools such as well-designed and insightful dashboards and automated control monitoring are increasingly critical to ensuring sufficient coverage, identifying emerging risks and increasing efficiency across your organisation.
But with such a complex and broad application field, how do you go about implementing data analytics in risk management in a way that will bring about the most benefit – and the least disruption – to your team?
Here are eight ways to implement data analytics in risk management, compliance and audits.
How data can improve risk management, compliance and internal audits
1. Start a Data Literacy Program for your team
Contrary to what you may believe, it is you and your team – not the external data experts – who can really drive the benefits of data analytics. Your team already has the risk and business knowledge. All they need is to be empowered with the knowledge and skills to use data analytics in their roles.
Most modern analytics technologies are becoming increasingly user-friendly and allow for self-service use by a trained business user. By creating a Data Literacy Program for all your staff, you’ll equip them with the skills they need for the future, growing your team’s internal capabilities. A good Data Literacy Program is embedded in day-to-day work, includes short, frequent interactions with the data and tools, links to staff performance goals and is fun to participate in.
2. Continuous risk monitoring
Data analytics can be used to continuously monitor the key risk indicators of your business, identifying areas of concern so that the right actions can be taken early. A unified risk dashboard, powered by analytics, can be used by all three lines of defence – business operations, risk management and compliance, and internal audit functions – to help your business respond to risks in a timely manner and focus your assurance activities in the right areas. Your business stakeholders will also appreciate the holistic data-driven view of areas where risk has increased recently.
By automating the process of deep-diving into data, connecting different data sets and visualising them clearly, risk, compliance and audit professionals have greater visibility, enabling them to fully assess your business’ risk universe and focus on the right areas.
3. Continuous controls monitoring
Analytics can also be used to monitor the controls that operate across your company’s systems and departments. With continuous controls monitoring, you’re alerted immediately if an existing control isn’t operating correctly, allowing your team to address the issue before it becomes a larger problem. By automating controls monitoring, you also increase accuracy as the analytics solution can ensure full compliance by checking 100% of cases, instead of just a sample.
4. Assess emerging risk areas with ad hoc analytics
Data analytics can help to assess potential or emerging risk areas to determine if controls are actually necessary before your business invests in a large and costly solution. A rapidly-produced minimal viable product (ad hoc analytics) can quickly provide you with a view of the risks or areas of concern, assess the severity and determine the impact on the company. This type of analytics is commonly used in internal audits or other specific, event-driven situations. However, the solution developed and knowledge obtained can then inform long-term control monitoring and processes.
5. Automate manual processes
By using analytics, you can eliminate many manual processes associated with risk management and controls monitoring, while improving efficiency and coverage. Day-to-day tasks, such as reporting, can be automated using analytics tools including robotics and rules-based analytics. As well as giving you more time to focus on tasks that require human skill and judgement, automation can improve your understanding of the risks and identify areas of greatest concern faster, so that your team can quickly take action.
6. Improve your assurance strategy
Developing a cohesive assurance strategy can also be driven by analytics in risk management. Internal audit teams need to be able to carefully pick and choose where they focus their efforts within business. This is traditionally done through audit planning, stakeholder interviews, process walkthroughs and other manual tasks. However, the ever-increasing volume of data can help generate insights and improve the time-consuming process of planning. By using analytics to process large amounts of information, you can improve your ability to identify the biggest areas of risk that need to be addressed first, therefore developing a more effective assurance strategy that meets your business’ needs.
7. Provide end-to-end coverage
Sometimes teams within a business don’t operate in a unified manner, meaning they aren’t actively sharing data analytics with each other. An automated data analytics approach allows communication to flow across business departments. Having a central function that will support not only one particular division, but all divisions, improves visibility across your organisation. It’s a holistic approach to data that gives your company the ability to better tackle potential risk and compliance issues.
8. Visualise your insights into risk and coverage
By visualising relevant insights appropriately, you can improve your business’ impact and enable clear communication. Key indicators on a risk management and compliance dashboard will give you an accurate overview of your risk position at any given point in time. Different thresholds can be assigned alerts and when these indicators are not in the expected ranges or the controls become less effective, you can instantly see how your business may be impacted. So, rather than the problem being buried in a data silo or a spreadsheet, it’s right there on the surface, enabling your team to address it immediately. With greater visibility, risk, compliance and audit professionals can operate more proactively, instead of reactively.
The value of data analytics in risk management, compliance and audits is clear: increased coverage, improved compliance, greater visibility and more strategic insights that empower your business in the world of risk. And it doesn’t have to be a daunting process to implement analytics, particularly in one go. At Optivia, we collaborate with businesses to progressively and iteratively build analytics solutions that are transparent, easy to use and deliver value quickly thanks to our dedicated and customisable risk management data analytics tools. If you want to learn more about how we can help contribute to your organisation’s risk coverage and compliance, contact us today.