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ISO 9001:2015 Addresses Risk. Is Your Organization Ready? Tracks


all disasters. The method is to regularly copy information and store it in a backup system at a secure, off-site location. Data at this location should be tested for accuracy regularly.


ISO/IEC 27001 provides controls for BC management. The following are components of a BC plan (BCP):


• Business risk and impact analysis. • Initial response activities for a disaster event.


• Procedures for managing emergencies and business recovery processes.


• Plans for training at multiple levels. • Procedures for keeping the BCP up-to-date.


BCPs should be exercised periodically. Some questions an organization should ask about its BCP are:


• Does a written plan exist to ensure continuation of information processes?


• Is the plan updated and tested annually? When do signifi cant modifi cations to computer hardware, software or application systems occur?


• Is the back-up media tested regularly?


• Are application programs, application data and operating system software backed up periodically?


• Are copies of the plan and the back-up information retained off-site?


Risk Analysis Methods


Risk analysis starts with the organization determining its risk appetite and risk tolerance so all members of the organization can understand the risk philosophy. After these are decided, there are tools to determine the risk levels and manage the identifi ed risks. One key tool is the organization’s controls. These are especially important for compliance to SOX. Compliance includes fi nancial controls at the entity and activity levels.


Risk Appetite and Risk Tolerance


Risk appetite is the amount of risk on a broad level an entity is willing to accept. It is the measure of the risk reward trade-off within the business. In terms of SOX compliance, risk appetite refl ects the tone at the top. It is a major consideration in shaping the control environment, as outlined by the Committee of Sponsoring Organizations of the Treadway Commission. Risk


44 November/December 2015


assessments beyond the boundaries of the risk appetite should result in preventive actions being implemented.


Risk appetite acts as a driver for allocation of capital to identifi ed risks. Improving the understanding of risk appetite leads to a more effi cient allocation of capital across the organization. It should be a function of the capacity to bear risk. Constraints on risk appetite include the capital needed to maintain the organization’s credit rating and meet regulatory capital requirements.


On the other hand, risk tolerance relates to the entity’s specifi c objectives. It is the amount of variation relative to the objectives an entity is willing to accept. Risk tolerance varies within an organization.


While risk appetite is a broad, entity-wide concept, risk tolerance has a narrower focus. An organization may have different risk tolerances for its various operating units. When the individual risk tolerances are combined, however, they should fall within the overall risk appetite set by top management and the board.


Using Controls


One important tool for managing risk is the organization’s set of controls. Controls are especially important for compliance to SOX. Auditors test the controls as a key part of the compliance process. The fi nancial and quality controls are at two levels, entity and activity, while the quality controls also appear as “shall” statements in ISO 9001 and ISO 14001. Shall statements are often accompanied by requirements to submit data. Some process performances requirements also include records of results, which can be used to identify impending risks.


Examples of entity-level controls include: • HR policies. • Code of conduct. • Communication strategy. • Accounting policies.


• Management’s risk assessment process, organizational structure and contract review. Contract review requirements are related to quality requirements in ISO/DIS 9001:2015, Clause 8.2.3—Review of requirements related to goods and services.


Activity-level controls include reconciliation of the general ledger to a subsidiary ledger, automated data validation and edit


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