The full form of RCSA is Risk Control Self Assessment.

It’s been more than a decade since the economic meltdown of 2008, and the global financial landscape has evolved dramatically. Market conditions are experiencing a positive shift across many jurisdictions, central bankers are finally hiking interest rates and disruptive technology has totally rocked the global financial landscape. Yet while many of these changes are perceived to be great for consumers and industry, they’re also accompanied by a worrying degree of risk and uncertainty for large organisations and financial institutions.

FIs are undeniably in the midst of a prolonged period of substantial operational risk, and many of these potential threats will only continue to grow over the course of 2019. Geopolitical risks such as Brexit and the UK’s uncertain future relationship with the EU, the rise of populist political parties and the Trump Administration’s repeated intentions to renegotiate key trade agreements have all had an impact on supply chain management, cross-border payments and FX.

Elsewhere, major regulatory updates and legislation from PSD2 and MiFID II to GDPR have created complex and costly compliance hurdles for FIs and firms across a wide range of industries – while enterprising fintechs are leveraging innovation to compete with and replace established financial institutions, banking products and traditional B2B and B2C relationship dynamics.

In short, institutions are quite literally surrounded by risk on all sides. In order to survive, sustain success and create value, firms must deploy robust risk management techniques, strategies and processes. That winding journey begins with a risk and control assessment.

What is a risk and control self assessment (RCSA)?

A risk and control assessment is the process by which organisations assess and examine operational risks and the effectiveness of controls used to circumnavigate them. It’s one of the easiest and most effective tools in the risk management arsenal, and the objective is simple: to provide firms with reasonable assurance that all business objectives are going to be met, and existing risk management protocols are sustainable and robust.

Risk control assessments are included in many regulatory frameworks and are designed to ensure the reliability and integrity of information, confirm compliance across internal policies, external regulatory responsibilities and safeguard assets. Similarly, the RCSA process also helps institutions to assess how efficiently and economically they’ve been using resources and how closely teams are aligning with established objectives and goals.

Bearing that in mind, the benefits of RCS assessments are relatively self-evident. Because the exercise generates crucial information on operational risks and internal controls, internal auditors and managers can use RCSA findings to judge the quality of control.

In turn, not only do RCSAs encourage management and staff to assume and share responsibility for internal controls, but they also give organisations the opportunity to focus efforts on both informal and formal controls.

Likewise, these assessments double as an effective bottom-up feedback mechanism to help organisations be more proactive, reduce audit exposures and improve the image and visibility of internal audits. Although risk and control self assessment can be time consuming, they also identify, enhance and more evenly distribute responsibility across an organisation to heighten awareness and accountability.

Banks and other financial institutions enjoy further benefits by utilising RCSA techniques as part of an integrated risk management strategy. This is because a facilitated RCSA can vastly improve the control environment of FIs by increasing awareness regarding organisational objectives and motivate personnel to more carefully design and implement operating control processes.