Weighted Risk Compliance Scoring System
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Solution Overview
Problem
Existing systems for managing internal control risks lack a quantitative approach to evaluate and compare risk levels over time, relying on a single weak link method that does not consider the significance of non-compliant processes, making them unreliable for measuring risk effectiveness.
Innovation Solution
A three-tiered risk management system that evaluates risks, subrisks, and control procedures using a weighted approach, allowing assessors to rate risks as High, Medium, or Low, and assign compliance ratings (GREEN, YELLOW, RED, or BLUE) to control procedures, with weights assigned based on their criticality, enabling the creation of action plans and progress tracking.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If a single weak link approach is used to identify risks, then the system can quickly flag non-compliant processes, but it cannot distinguish between significant and insignificant non-compliance issues
Solution Approach 1:
The patent assigns different weightings to different control procedures based on their relative importance to risk mitigation. This allows the system to treat each control procedure locally according to its significance, rather than applying a uniform single weak link approach. The weighted scoring mechanism enables differentiation between critical and non-critical non-compliance issues.
Solution Approach 2:
The system introduces quantitative parameters (weightings and scores) to transform the qualitative single weak link approach into a measurable evaluation system. By changing from a binary compliant/non-compliant parameter to a weighted score parameter, the system can assess both the presence and significance of control deficiencies.
2Adaptability or versatility
If existing risk management systems are used, then they provide a structure for reviewing risks and controls, but they cannot reliably compare risk measurements over time or across entities
Solution Approach 1:
The patent creates a universal weighted scoring framework that can be applied consistently across different risk elements, control procedures, time periods, and organizational entities. This standardized approach enables reliable comparison while maintaining the adaptability to review various types of risks and controls through the same quantitative lens.
3Measurement precision
If a quantitative weighted approach is implemented, then meaningful risk comparison and tracking become possible, but the system complexity increases
Solution Approach 1:
The patent segments the risk evaluation into hierarchical levels (risk elements, control procedures, individual controls) and assigns weightings at each level. This segmentation allows the complex quantitative evaluation to be broken down into manageable components, making the system more implementable while maintaining measurement precision.
Data Source
AI summary
A data processing system and method of using said data processing system for assessing and managing risk is disclosed. The preferred embodiment of the method includes the steps of identifying a set of risk elements; determining an importance for each said risk element; identifying any subrisks associated with said risk elements; identifying one or more control procedures for each said subrisk element; assigning weights to each said control procedure; rating compliance with each said control procedure and calculating an overall weighed compliance score. The method may further include the steps of for each non-fully compliant subrisk, allowing the user to determine whether to accept the risk or generate an action plan addressing the risk. The method may further preferably include calculating future compliance scores based on said action plans. The system further provides for sorting and displaying compliance scores by a number of parameters.