When disaster strikes, 90% of businesses don’t make it past two years. The reason isn’t always the disaster itself but the lack of preparedness.
Audit and compliance professionals must take a calculated approach to risk management, internal controls, and monitoring to protect operational continuity and company success. An internal audit risk control matrix is the starting point to prepare against future risks.
What is an Internal Audit Risk Control Matrix?
A risk control matrix (RCM) or risk and control matrix (RACM) is a visual tool for mapping risks your organization faces against the controls designed to address them. Typically, it’s a grid with risks on the vertical axis and controls on the horizontal axis.
Governance, risk and compliance (GRC) professionals can use an RCM to locate a specific risk on the vertical axis and then read entries on the horizontal to see:
- Controls to contain the risk
- Who manages that risk in the organization
- When the control was last tested
- How likely the risk is to occur
- The severity of risk consequences
With such a comprehensive view of risks and their control activities, you gain a realistic view for developing an effective risk management plan.
Core Components of an Internal Audit Risk Control Matrix
An RCM has several moving parts that work together to make it effective. Here are the key components.
| Component | Overview |
| Business objectives | Scope of the RCM linked to specific business goals or projects across business units |
| Risk identification | List of potential risks that could impact business objectives |
| Existing controls | Summary of current control activities place to manage and reduce identified risks |
| Control owners | Process owners or departments responsible for each control |
| Risk assessment (likelihood and impact) | Evaluation of how likely each risk is to occur and the severity of its consequences |
| Control effectiveness | Assessment of how well each control mitigates its associated risks and meets organizational standards |
| Gap analysis | Areas with missing or insufficient controls or control deficiencies |
| Remediation plans | Actions designed to address material weaknesses and strengthen overall resilience |
But how exactly do you build an internal audit risk and control matrix?
Building Your Internal Audit Risk Control Matrix: A Step-by-Step Guide
To build an effective risk and control matrix for internal auditors, tailor it from scratch to meet your organization’s needs.
Step 1: Define Business Processes and Objectives
Identify the business objectives your organization aims to achieve. Outline the key processes that support these objectives, ranking them according to their significance to operational continuity and control environment effectiveness.
Step 2: Identify Potential Risks
Assemble stakeholders across departments to help identify and categorize risks associated with each process or objective. For a comprehensive risk identification exercise, engage:
- Process owners
- Internal audit leadership
- IT specialists
- Compliance officers
- Risk management professionals
With your team, consider the following framework to systematically identify internal and external risks.
| Stage | What to do |
| 1. Risk identification | Hold brainstorming sessions with key stakeholdersConduct process walkthroughs to uncover gapsReview historical data to identify past failuresConsult the industry risk database to benchmark against common sector-specific risksRefer to regulatory guidance to identify compliance-related risks |
| 2. Risk categorization | Categorize identified risks into groups such as:Operational risksStrategic risksFinancial risksTechnology risksCompliance risks |
| 3. Risk documentation | Record:Clear risk descriptionsPotential causesPotential impact on business objectivesInherent risk rating before control |
This structured method ensures all relevant assertions and control criteria are considered when evaluating exposure.
Step 3: Identify Existing Controls
For each risk, list the current controls that mitigate it to understand your organization’s existing risk management structure and spot areas needing improvement. Determine whether these controls are proactive or reactive, and confirm that you have sufficient evidence to implement them. Verify that the controls meet industry regulatory compliance standards.
Step 4: Assign Control Owners
Designate the individuals or teams responsible for each control. Process owners dedicate their full attention to achieving the desired outcome. Defining roles promotes accountability and helps track progress through the risk management process.
Step 5: Assess Risks (Likelihood and Impact)
Evaluate the likelihood and potential impact of each risk before and after considering the existing controls. Assess whether there is a reasonable possibility of failure in any material respects, especially in financial or regulatory processes. Use this guideline scale to categorize risk likelihood.
| Risk rating | Rating criteria |
| Highly likely | Risk with over 91% chance of happening |
| Likely | Risks with a 61-90% chance of happening |
| Possible | Risks with a 41-60% chance of occurring |
| Unlikely | Risks with an 11-40% chance of happening |
| Highly unlikely | Risks with a 0-10% chance of occurring |
For risk impact, use the following scale.
| Impact rating | Rating criteria |
| Catastrophic | Severe impact threatening business continuity or long-term viability |
| Major | Significant operational or financial loss, with potential regulatory and reputational consequences |
| Moderate | Noticeable impact on operations or objectives requiring management attention |
| Minor | Limited disruption or small financial or reputational effect |
| Insignificant | Minimal impact on operations or objectives |
Step 6: Evaluate Control Effectiveness
Examine how well the existing internal controls are performing:
- Assess the design adequacy to confirm each control addresses the intended risk.
- Review operational effectiveness to verify that control functions as intended.
- Identify control gaps, such as vulnerabilities, missing measures and overlaps.
- Evaluate residual risks after applying controls.
- Create a control testing schedule to monitor control performance.
Step 7: Document and Maintain the RCM
Now that you’ve identified and assessed risks and controls, document a formal RCM. While spreadsheets have traditionally been the default documentation tool, more organizations are now adopting specialized GRC platforms.
Documentation promotes uniformity and continuity of implementation across your organization. Regular updates keep your RCM current with the evolving risk environment and regulatory changes.
The Importance of a Risk and Control Matrix in Internal Audits
An RCM offers numerous benefits, providing a framework for risk management while supporting the internal financial audit process steps:
Better Risk Identification and Assessment
An RCM provides a systematic approach to identifying and assessing risks and controls across your organization. This structured system helps cover all critical areas to prevent gaps and oversights in your risk management.
Improved Accountability and Ownership
A risk control matrix delegates roles and duties to individual risk professionals or departments. Clear process ownership prevents teams from shifting blame or claiming undeserved credit.
Facilitation of Compliance Efforts
An internal audit risk control matrix provides a clear outline of the compliance standards and a template for GRC professionals to follow for compliance with regulatory bodies, such as:
- Service Organization Control (SOC 2)
- Health Insurance Portability and Accountability Act (HIPAA)
- General Data Protection and Regulation (GDPR)
- Payment Card Industry Data Security Standard (PCI DSS)
Additionally, an RACM delegates compliance roles to designated individuals or departments, speeding up implementation and improving accuracy.
Support for Audit Processes
An RCM provides a framework that internal auditors can use to assess functions such as financial statements, cyber controls or compliance processes. Without it, auditors would have to review processes in silos, which is resource- and time-intensive.
Best Practices for an Effective Risk Control Matrix
While there’s no one-size-fits-all approach, some best practices can help you build an RCM that effectively manages evolving risks:
- Integrate your RCM with GRC software like Onspring to automate risk assessments and control processes and receive real-time alerts when risk profiles change
- Regularly review and update your RCM to stay on top of emerging risks
- Collaborate with stakeholders to capture diverse insights and improve risk controls
- Use clear and concise language for easy understanding
Create a Dynamic Internal Audit Risk Control Matrix with Onspring
Onspring offers a flexible, AI-powered platform so you can build and maintain a dynamic internal audit risk control matrix. With our software, you can integrate risk data and automate control tracking to simplify audits and strengthen internal controls.
You also get collaborative features that simplify collaboration between process owners, internal auditors, and leadership, ensuring your RCM remains accurate and aligned with your organization’s objectives. Schedule a demo today and see how Onspring can help you create a comprehensive risk control matrix customized to your organization’s needs.