COSO (Committee of Sponsoring Organizations) of Treadway Commission, the United Kingdom’s Cadbury Commission, and CoCo the Canadian Criteria of Control Committee have defined risk control models in a new way. They have established a new definition based on the understanding that a risk control model may support best practices in the system. However, it may not support the success of the organization.
The new definition of risk control models according to these organizations embodies four basic principles of best practices.
Risk Control is not limited to a single section or level of an organization. It applies to every aspect and activity in the organization.
The best practice of learning and reflecting on the observations made and measuring the control on activities. Through this best practice the environment, objectives, actions and learning processes are maintained.
Recognizing critical importance of values and behavior is an essential best practice. It is important to acknowledge that people have the capacity to ensure self-control.
Paying specific attention to the concept of responsibility for compliance with control is an essential best practice. This is a very confusing aspect of risk control and very difficult to implement successfully.
With the implementation of the new definition of risk control, other issues have come to light. Such as:
These new risk control models are bringing new best practices into consideration. They adopt a broader way of interpreting controls. Overall, these new principles have introduced objective setting, concept of monitoring and options improvement for best practices.
This makes it a crucial requirement for organizations to ensure compliance with the new control models for best practices.