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  • Rory Roberts

Audit Requirements for a Risk Identification Process

1. Audit should evaluate whether the bank has a robust risk management framework in place that is appropriate for its size and complexity. This might include reviewing policies and procedures related to risk identification, assessment, and control.

2. Risk identification process: Audit should examine the bank's process for identifying risks, including how it determines the scope of its risk assessment and how it gathers and analyzes information about potential risks.

3. Risk assessment process: Audit should review the bank's process for assessing risks, including how it evaluates the likelihood and potential impact of identified risks and how it determines the appropriate level of controls to put in place.

4. Control effectiveness: Audit should evaluate the effectiveness of the controls that the bank has put in place to manage identified risks, including whether they are properly designed and implemented.

5. Testing of controls: Audit should test the effectiveness of the controls that the bank has put in place to manage identified risks, including whether they are operating as intended.

6. Documentation: Audit should review the documentation related to the risk identification process, including risk assessments, control documentation, and testing results, to ensure that it is complete and accurate.

7. Compliance with regulatory requirements: Audit should ensure that the bank's risk identification process is in compliance with relevant regulatory requirements, including any specific requirements related to risk management.

8. Communication of risk information: Audit should assess the bank's process for communicating risk information to relevant stakeholders, including management, the board of directors, and regulatory authorities.

9. Risk monitoring and reporting: Audit should evaluate the bank's process for monitoring and reporting on identified risks, including how it tracks and reports on the status of identified risks and the effectiveness of controls in place to manage them.

10. Training and awareness: Audit should assess whether the bank has provided appropriate training and awareness to its employees on risk management, including how to identify and report on potential risks.

11. Incident response: Audit should evaluate the bank's process for responding to incidents that could pose a risk to the organization, including how it investigates and manages such incidents.

12. Third-party risk management: Audit should assess the bank's process for managing risks related to third parties, including vendors, partners, and suppliers. This might include reviewing the bank's due diligence process for evaluating and selecting third parties, as well as its process for monitoring and managing risks related to these relationships.

13. Risk appetite and limits: Audit should review the bank's risk appetite and limits, including how it determines the level of risk it is willing to accept and the controls in place to ensure that risk is managed within those limits.

14. Stress testing: Audit should assess the bank's process for conducting stress tests to evaluate the impact of potential scenarios on its operations and financial performance.

15. Overall, Audit should aim to ensure that the bank has an effective risk identification process in place that is appropriate for its size and complexity and that is in compliance with relevant regulatory requirements.

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