Inherent Risk and Control Risk are the critical components of the audit risk model, which is a framework auditors used to manage overall risks involved in audit management process. Understanding the differences between them is crucial, a comprehensive knowledge about these risks allows auditors to conduct a more efficient and effective audit process, either conducted by an internal or external auditor.
Risk management process involves identification, assessment and mitigation of risks affecting overall goals of an organization. The primary goal in the context of auditing is to ensure that financial statements do not include material weaknesses and are accurate. To help auditors achieve this goal, the conceptual audit risk model is broken down into three main components, inherent risk, control risk and detection risk.
Definition of Inherent Risk
Inherent risks are natural risks related to a company’s overall business activities such as complexity of business transactions and calculations that could be naturally more prone to error, judgmental matters, economic factors, accounting estimates that require valuations for doubtful accounts may produce higher inherent risk or material misstatement assertion in financial statements. These risks are considered prior to any controls implementation or mitigation procedures are put in place. These risks stem from the varied nature of industry in which the business runs and the nature of business operations.
Definition of Control Risk
Control risk on the other hand is the risk of material misstatement assertion in a financial statement that is not detected, prevented or corrected promptly by the internal controls of a company. This risk appears when controls are ineffective or not designed to detect and prevent errors and fraud, such as lack of proper segregation of duties, single person is starting and approving financial transactions that could lead to material misstatement undetected. Control risk is considered high if a company’s internal controls are improperly designed or are weak.
Role of Internal Controls
Internal controls are essential for ensuring reliable financial reporting and reduced potential losses as all business activities carry some level of inherent risks. Internal controls are procedures and policies that are implemented by a company to protect its assets and to ensure that financial records are correct, ensuring compliance and operational efficiency. Simply setting up internal controls is not enough, these controls are key factors in assessing controls risk, must be well-designed and working effectively for mitigating risks.
What is Detection Risk?
Detection risk is the third part of audit risk model, unlike inherent and control risk that are related to internal environment of a company, auditors manage detection risk. This risk represents the processes performed by auditors that may not be able to detect material mistakes, error or fraud. Auditor can use more extensive processes and procedures to manage and reduce detection risk and provide professional judgment, as the level of detection risk is related to inherent and control risk and if those are high, auditor should set a low detection risk for keeping overall audit risk to an acceptable level.
The Audit Risk Model
The Audit Risk Model is the framework used by auditors to assess different types of risks in financial reporting for weaknesses, it helps auditors to assess the nature, timing, and extent of their auditing processes for the likelihood of granting an incorrect opinion about financial reporting. Ultimate goal of Audit Risk Model is to reduce the overall audit risk to an acceptable level.
Three Elements of Audit Risk
As described above briefly the three elements of audit risk, we will just enlist the definition of them here and will provide more detail in the later sections. The three elements of audit risk are as follows:
- Inherent Risk: Suspecting the material misstatement in a financial statement prior to the implementation of internal controls.
- Control Risk: Risk of misstatement not prevented or detected on time by an internal control system of a company.
- Detection Risk: Risk that is not detected by auditor’s own procedures for material weaknesses that exist.
Definition of Audit Risk
Audit risk is a probability which expresses inappropriate opinion of the misstatement or weaknesses in financial reporting, even though auditors have given them a clean opinion, producing a chance that financial statements are materially incorrect. It is the combined effect of all three risk types, inherent, control and detection risks.
Goal of the Audit Risk Model
The primary goal of the Audit Risk Model is to provide guidance to auditors to plan and perform their work more efficiently in evaluating levels of inherent and control risk for managing overall audit risk. By assessing the inherent and controls risk, auditors can then determine the detection risk acceptable level, in case of higher inherent and control risk, auditors must perform more extensive testing of the risks to reduce the detection risk acceptable level, to ensure overall audit risk is in accordance with acceptable limits.
Importance of Accuracy
Capital markets function on the basis of accurate financial statements, and investors, creditors, government regulators and other stakeholders rely on these financial statements to make correct economic decisions. If a Certified Public Accountant (CPA) firm has failed to detect errors or misstatements in financial reporting, they can face severe legal consequences, including lawsuits, regulatory penalties and damage to their reputation.
Audit Risk Formula
Audit Risk Formula represents the relationship between the three components of audit risk model; it is expressed as follows:
Audit risk = Inherent risk x Control risk x Detection risk
This formula highlights the assessed levels of inherent risk and control risk, then the auditors decide which detection risk level they can accept. If a company produces elevated levels of inherent and control risk, then it would need more detailed and extensive procedures and testing by auditors.
What is Inherent Risk?
Inherent risk is the baseline in the world of financial auditing and risk management; these are the natural untreated risks that exist in financial statements or business processes before considering the impact of internal controls to mitigate it.
Factors Leading to Increased Inherent Risk
There are several factors which can increase the level of inherent risk in an organization, auditors should be thorough in finding and evaluating these factors to figure out the material mistakes in financial statements. Industries rapidly face advancements in technology or business environment changes such as consumer demand shift. Companies related to these industries could face higher risk of their services or products becoming obsolete if they are unable to adapt accordingly. Businesses with complex transactions such as estimations, calculations and consolidation of financial data from multiple subsidiaries become more prone to errors. Management can face integrity issues if they do not promote or set up an ethical governance culture, which can lead to material misstatements and in return increase the inherent risk.
Examples of Inherent Risk
The chance of inherent risk depends on several aspects of an entity’s business operations and financial reporting; some common examples are as follows.
- Unethical management engaged in questionable business practices such as not setting ethical tone at the top can harm the reputation of company.
- Historically weak audits showing recurring errors in financial statements, such as biased or ignored mistakes in financial reporting.
- Company engaged in transactions with related entities, which could lead to risk of misrepresented asset values.
- Cybersecurity data breach due to an employee losing an access card, weak passwords or becoming victim of phishing fraud can result in financial losses and reputational damage.
How to Identify Inherent Risks
The level of inherent risk significantly varies from organization to organization. Complex or highly regulated businesses such as financial or healthcare institutions may face higher risk, while simple businesses such as small businesses with low volume of transaction generally have low inherent risk. Auditors use different approaches to detect and analyze inherent risk using the following key factors.
- Business type and industry in which an organization works, such as financial institutions or technology firms that often face higher level of inherent risks due to their complex nature of transactions.
- The methods an organization uses to process its financial data e.g., automatic or manual. Manual data entry is prone to human error than the automated systems.
- Operational complexity such as complicated supply chain, many subsidiaries, number of operating locations pose increased potential for consolidation and financial reporting errors.
- Aggressive management style such as giving priority of short-term benefits over long term reliable success.
- Review of earlier audits to find ongoing weaknesses and inherent risks.
What is a Control Risk?
Control risk is defined as the risk of irregularities and errors leading to material misstatement that is not detected, prevented and corrected by the internal control system of an organization on time. It shows that internal control system is not efficient and effective enough to catch and fix financial reporting errors.
Origin of Control Risk
Control risk appears due to the limitations in internal control system of the organization; it exists when controls are poorly designed, implemented and monitored to detect and eliminate the misstatement risk.
Management’s Role
No control system is perfect by default and can break down for several reasons, which is why it is management’s responsibility to design, implement and maintain an effective control system. Regular evaluations and updates of controls should be made to ensure that controls are working as they intend to find weaknesses.
Factors Contributing to Control Risk
Several factors can contribute to control risk, these weaknesses in control framework can create chances for unnoticed errors or fraud, below are some key factors:
- No or lack of segregation of duties, single individual having authority over a complete transaction such as starting and authorizing which can create opportunity for error or fraud.
- Lack of management oversight in the document approval process leading to unauthorized transactions.
- Failure of transaction’s verification and accuracy resulting in incorrect financial data.
- Lack of transparency in supplier’s selection process can create kickbacks risk, increased pricing or other fraudulent activities such as existence of ghost suppliers or vendors.
- Weaknesses in internal control system’s design, implementation or monitoring.
- Human errors in execution of controls or intentional fraudulent activities.
- Major changes in an organization’s operation and its environment such as its growth, business model shift or addition of modern technologies, can create new risks.
Auditor’s Assessment of Control Risk
Auditors evaluate control risk as an essential part of audit planning process, deciding the nature and extent of audit procedures based on performance of internal controls of company and categorizing risk level e.g., high, low or moderate. If the control risk is high, it represents weak internal controls, then auditor must perform extensive testing. If the risk is low based on the effectiveness of controls, they should depend more on the internal controls assessment and perform less additional testing.
Examples of Internal Controls
Financial reporting system relies on an effective internal control system. Common examples are as follows.
- Chief Financial Officer should perform a high-level review of payments, which adds layer of oversight.
- Verification of all recorded invoices by payable manager ensures accuracy.
- Unprocessed invoices should be checked periodically by payable manager to ensure correct accounting.
- Department heads should review the actual reports against the budget so they can find and investigate variances on time for inefficiencies or errors.
Example of a Control Risk Scenario
To demonstrate practical assessment of control risk, we can take scenario of a company and consider the following steps.
- Audit Planning: Auditor begins by assessing the risks associated with the operations of the company.
- Internal Controls Evaluation: Auditor finds several weaknesses during the evaluation such as:
- Lack of proper segregation of duties, same person processes payments to vendors who approves the purchase orders.
- Management does not perform thorough review of financial statements before they are published.
- There are insufficient or weak IT controls such as access policies or weak password policies for the accounting system of the company.
- Assessing Control Risk: Auditor assesses the control risk and concludes risk level as high due to above weaknesses in internal control system.
- Adjusting Audit Procedures: Based on the high control risk level, auditor decides that internal control system is not dependable, and they need to perform more substantive testing in order to provide correct opinion about financial reporting.
- Reporting: After excessive testing is performed, auditor will issue their opinion along with identified control weaknesses and improvement recommendations to management and board of directors.
Residual Risk
Even though a strong internal control system is present, some risk will always have been left over after all the control measures have been taken by the management, this risk is called residual risk. This risk can be left due to judgment errors, collusion between employees or unforeseen external factors.
What is Detection Risk?
Inherent and control risks are related to an organization’s internal environment, but detection risk is solely related to the effectiveness of audit procedures conducted by auditors such as auditor judgment, sampling methods or limitation in audit procedures. It is a probability that audit procedures will not be able to find a material mistake in financial statements, a risk of error or fraud unnoticed by them and they will grant an incorrect opinion about financial statements being correct. This risk is inherent due to auditors typically depend on sample transactions and cannot review each single transaction.
How Auditors Reduce Detection Risk?
Although detection risk cannot be fully eliminated, auditors use the audit risk model, based on combined inherent and control risks levels e.g., high, moderate or low and then reduce the detection risk to an acceptable low level. Auditors can use different strategies to reduce the detection risk, some of which are as follows:
- They can use experienced, competent and highly trained professionals according to the expertise in client’s industry to enhance the process of finding complex misstatements. Assigning a proper team size, sufficient resources and time to conduct thorough procedures.
- They can adjust the mix of procedures to reduce the detection risk level by performing detailed analytical tests such as confirming balances or inspecting physical assets as compared to basic effectiveness tests for internal controls.
- They can extend the scope and depth of audit procedures such as increasing the sample transaction size to a larger one and conducting the procedures across more reporting periods.
- Establishing a strong quality control system within CPA firm to ensure that audits are conducted by professionals, keeping industry and regulations standards in mind.
SOC 2 Audit and Risk Mitigation
System and Organization Control (SOC) 2 is part of a suite of reports developed by American Institute of Certified Public Accountants (AICPA) to help service organizations to demonstrate their security and data protection practices, particularly for the service organizations managing customer data for other organizations.
Purpose of a SOC 2 Audit Report
Primary purpose of SOC 2 report is to evaluate effectiveness of internal controls of a company according to Trusted Services Criteria (TSC) which are benchmarks for assessing and improving security, availability, processing integrity, confidentiality, and privacy practices.
- Security: Assurance that system resources are protected against unauthorized access.
- Availability: Ensuring that systems are operational as per contract or service level agreement.
- Processing Integrity: Ensuring that system processing is accurate, prompt and authorized.
- Confidentiality: Ensuring that information is protected and confidential as per service agreement.
- Privacy: Ensures that personally identifiable information (PII) is collected, used, kept, disclosed, and disposed properly according to privacy notice of organization.
How SOC 2 Audits Mitigate Risk
SOC 2 audit report provides a risk-based approach for risk management similar to ISA 315 framework standards; an independent assessor examines several aspects of an organization’s security posture.
- Auditor starts by assessing the systems and process vulnerabilities according to TCS to understand the inherent risks within the operations of an organization.
- A significant part of SOC 2 audit report is evaluating the design and effectiveness of internal controls implemented to mitigate risks, which helps lowering control risk.
- Auditor thoroughly evaluates the documented policies and procedures of an organization to ensure their alignment with TCS.
Mapping Controls to SOC 2 Criteria
Organization must map their internal controls with TSC requirements in order to achieve both security and compliance, key focus areas are as follows:
- Monitoring and updating IT controls such as network activity, software updates and patches to make sure that IT operations are secure.
- SOC 2 control list suggests that organizations must implement all the controls related to logical and physical access, change management, system and operations and risk mitigation.
- Implementing logical access security to protect information such as enforcing least privilege principle, role-based access and performing regular user access reviews.
- Compliance audit requires collection of reliable evidence such as financial statements, bank statements and reconciliations, payroll records or tax returns documentation etc. to the auditor saying that the controls are effectively operating periodically e.g., quarterly or annually.
Benefits of SOC 2 Audits for Risk Management
Aligning with SOC 2 audit reports provide several benefits contributing in overall strong risk management program, key benefits are as follows:
- SOC 2 assessment process helps in finding and mitigating security gaps before they can become a security incident or data breach.
- Controls mapped with SOC 2 criteria often align with other security frameworks standards like ISO 27001 and NIST as well as regulations for data protection such as GDPR and HIPPA to strengthen overall compliance efforts.
- Service organizations with SOC 2 certification provide assurance that client’s data is protected, which provides a competitive advantage and builds trust among their customers.
- Organizations can reduce the risk of data breaches and security incidents by proactively finding and mitigating using SOC 2 audit criteria, which in return prevents financial and reputational damage, legal fees or regulatory fines.
Understanding the Entity and Its Environment for Risk Assessment
Before starting the auditing process and evaluating inherent and control risks, it is an important first step to understand the environment of an organization as it shapes its risk profile. This foundational knowledge of business operations allows auditors to adjust their audit processes accordingly and set focus on the area that matters most.
Influence of the Business Environment
Business environments are continuously influenced by several factors such as industry trends, economic conditions and regulatory landscape. These factors can significantly influence the operations and financial reporting of the businesses. Key factors influencing risk are as follows.
- Industry-specific risks: Certain industries like finance and healthcare face unique risks due to strict requirements from industries related regulatory bodies and complex nature of transactions.
- Regulatory Environment: Adherence to compliance regulations like SOX, GDPR and HIPPA bring in more complexity and risk of non-compliance.
- Economic Conditions: External factors such as market fluctuations, interest rate fluctuations and inflation can increase the risk of misstatements in financial statements.
- Operational Structure: The complex operational structure of an organization such as multiple locations and multinational operations, complex business processes or reliance on third-party vendors and outsourcing can increase risk of errors and inconsistencies in financial reporting.
Role of the IT Environment
IT environment are extremely linked to financial reporting of an organization in today’s digital age, it governs how data is stored, processed and protected, which makes it a crucial part of risk assessment. It is important for auditors to have understanding of IT systems and controls to detect potential risks. Following key questions auditors must ask in order to assess the risk.
- Who has access to sensitive information and systems? Insufficient access control can lead to unauthorized access to sensitive information and cause data breaches.
- Are periodic access reviews conducted? Regular access reviews ensure that access permissions are right, and access is revoked to former employees.
- Are preventive and detective controls in place? Preventive controls such as firewalls, authentication protocols, encryption, segregation of duties, and user access restrictions can stop risks from occurring. Detective controls such as intrusion detection systems, system logs and monitoring tools help in finding risks after they have occurred.
- Are change Management controls present? Such as software are properly updated, patches are applied, and system changes are properly evaluated and approved.
Using Analytical Procedures to Understand Risk
Auditors use analytical procedures to find unusual trends, fluctuations and inconsistencies in financial data to detect higher risk of material misstatement, evaluation usually includes following trends.
- Auditors compare key financial metrics like debt-to-equity or gross margin to detect unusual changes; earlier financial reports can highlight concerned areas.
- Auditors compare historical trends against industry benchmarks to identify deviations from historical performance or industry standards, which could lead to further investigation.
- Auditors identify unexpected changes in transactions such as account balances or large sales at the end of reporting period which could lead to revenue manipulation, potentially fraudulent activity or errors.
Risk and Control Matrix (RACM): Effective Risk Management
Definition and Purpose
Risk and Control Matrix (RACM) is a powerful structured tool organizations use in risk management and internal audit. It provides comprehensive set of rules organizations can map to their corresponding internal controls designed to identify, assess and manage potential risks. The core purpose of RACM is to provide an organized framework which documents the relationship between risks and controls designed to manage them. It is essential for compliance officers, risk managers and internal auditors to assess the effectiveness of their internal controls, in order to prepare themselves for external audits.
Components of an RACM
RACM is built upon several key components working together to depict a detailed picture of risk and control environment of an organization, the components include:
- Risk Identification: Involves documentation of specific risks and challenges which could prevent an organization from achieving its strategic goals. Risks are usually categorized by area such as Business Operations, IT, Compliance, HR or Finance.
- Risk Assessment: Found risks are assessed to decide their likelihood and impact on specific areas and prioritize them using the rating scale such as high, medium or low to create a risk rating.
- Control Measures: The matrix then provide list on specific controls, policies, procedures and systems for each risk to be put in place for mitigation. These controls can be preventive, detective and corrective.
- Control Effectiveness: This component evaluates the implemented internal controls that how well they are working to reduce the related risks, evaluation can be testing procedures to confirm controls are working as intended. Controls can be categorized as Ineffective, Effective or Partially Effective.
- Action Plans: RACM may provide outlines for a corrective action plan if the controls are found ineffective, partially effective or the gaps are found in risk management practices of organization. The action plans may include assigning resources, responsibilities and timelines for corrective actions.
Example of a Hypothetical RACM
The below RACM example illustrates how it works by providing matrix in a tabular format with each row outlining different categories such as Finance, HR, Operations and IT with risk description, likelihood, impact, risk rating, control measures, effectiveness and action plans. Actual RACM will vary organization to organization and could be more detailed covering more areas, risks and controls.
| Category | Risk Description | Likelihood | Impact | Risk Rating | Control Measures | Effectiveness | Action Plan |
|---|---|---|---|---|---|---|---|
| Finance | Misstatement due to improper cutoff | Medium | High | High | CFO review and Month-end close checklist | Partially Effective | Increase cutoff testing, and automate reconciliations |
| Unauthorized access to the financial accounting system. | Medium | High | High | Role-based access controls are implemented, and user access reviews are conducted. | Partially Effective | Implement multi-factor authentication for all users. | |
| HR | Unauthorized changes in payroll | Low | Medium | Medium | SODs and approval workflow in HRIS. | Effective | Conduct periodic access reviews |
| Failure to comply with employment laws and regulations. | Low | High | Medium | Annual HR policies review by legal department. Compliance training for all managers. | Effective | None at this time. | |
| Operations | Supply chain disruption due to single vendor reliance | High | High | High | Vendor performance and contracts review | Ineffective | Find alternative vendors, set up contingency inventory |
| IT | Unauthorized system access | Medium | High | High | Role-based access, password policies, audit logs | Effective | Implement multi-factor authentication |
| Data breach resulting from a successful phishing attack on an employee. | High | High | High | Employee security awareness training is conducted quarterly. Email filtering and anti-phishing software are in place. | Effective | Continue monitoring and updating training materials. |
Examples of Risk Control in Practice
Sumitomo Electric
A global manufacturer Sumitomo Electric has embedded risk control into its corporate social responsibility framework in 2008 to make sure that business continues to run even when there are natural disasters such as earthquakes, pandemics or fires. The company has developed Business Continuity Plans (BCPs) to ensure core business operations can quickly resume after a disaster. When Great East Japan earthquake occurred in 2011, BCPs played a significant role in responding issues caused by the earthquake. The important part of their strategy is duplication such as creating backup systems and alternative locations for operations. They perform annual drills for employee training to prepare them for several emergency scenarios, ensuring prompt and effective response to incident.
British Petroleum (BP)
British Petroleum has implemented a wide range of risk controls after the 2010 Deepwater Horizon oil spill in Gulf of Mexico. This incident was one of the largest environmental disasters in history and a catastrophic example of mismanagement of inherent risk and control risk. There wasn’t a proper safety system and corporate culture, which is why after the disaster, BP has introduced new risk control strategy focusing on setting up a strong safety culture, shifting from cost-cutting goal to prioritized safety in decisions. They have invested in technology such as better drilling equipment and blowout preventers for future incidents. They worked with external security experts and regulators to ensure extensive insight, transparency and accountability. They have also introduced new safety training and drills for employees, and safety standards across their global operations. While disaster has resulted in financial losses and reputational damage for BP along with massive fines from regulatory bodies, after implementing the new risk management approach, they have reduced the operational hazards and rebuilt public trust.
Starbucks
A leading global coffee retailer, Starbucks manages its global supply chain risks for its core product coffee beans with diversification and ethical sourcing strategy and real-time advanced management and monitoring system. Coffee and Farmer Equity (CAFE) practices program is the cornerstone of this approach, developed with the help and collaboration with Conversation International. Starbucks buy coffee from 30 different countries and more than 400,000 farmers, avoiding reliance on a single region, avoiding threats from local events such as climate change, logistics disruptions, supplier non-compliance or political instability. CAFE outlines clear criteria for social responsibility, environmental leadership and economic transparency. The program include the verification of third-party processes, their integrity and audit to meet standards, ensuring continuous improvement model helping build long-term supply of high-quality coffee beans. With these practices, Starbucks has achieved supply chain stability, reduced operational risks and strong customer trust.
What Else Needs to be Considered in Risk Management?
Effectiveness of risk management is a continuous and dynamic process, it requires deep understanding of organizational functions, the industry in which business operates, and emerging internal and external threats or changes.
Ways to Identify Emerging Risks
Emerging risks are evolving or new risks which are difficult to identify and assess based on their unexpected nature, finding these emerging risks can provide a competitive benefit, key factors to identify them include:
- Gathering up to date information from various sources such as industry publications, competitor activities and technological advancements for emerging industry trends such as technological and economical shift which can affect the business.
- Engaging in future scenarios such as economic downtime, cyberattacks or regulatory changes, and planning for their impact on the effectiveness of existing controls, which helps organization to prepare for the events that have not yet happened.
- Use Big Data analytics and AI to identify anomalies and patterns in large datasets which could alert for evolving threats before they occur.
- Establishing open communication channels where employees can raise concerns, discuss potential threats and emerging risks without feeling uncomfortable.
- Assigning a dedicated risk management team to focus on external environment monitoring using structured frameworks to find probable future challenges and their mitigation.
Risk Control vs. Risk Management
Risk control and risk management are different components of larger process, while usually used interchangeably they serve different role in an organization’s overall internal control environment. Risk management is strategic process to identify, assess, prioritize and monitor all risks which can affect an organization, it is the “What and “Why” of risk management. Risk control is a part within a larger risk management framework, focusing on implementation of controls and strategies to eliminate and mitigate the identified and prioritized risks, it is the “How” of implementation of controls and strategies.
Inability to Eliminate All Risks
It is a common misconception that risk management can eliminate all the risks, in reality, it is important to understand that even with strongest controls, it is not possible to make an organization completely risk free. Risk control focuses on reducing the likelihood and impact of risks to an acceptable level aligning with company’s risk tolerance policy. Some risks are inherent in business environment or the nature of industry, other risks are either unforeseen or control risks result of ineffective controls, remaining risks are called residual risks. Companies implement effective controls to maintain stability, but they can never remove all risks to business.
Relationship Between Risk Control and Corporate Social Responsibility (CSR)
Corporate Social Responsibility (CSR) are closely interconnected as effective risk control is a foundational aspect for a company to be socially responsible. Risk control focuses on minimizing or preventing events which could harm the company and its stakeholders, including customers and its employees, which is directly aligned with principles of CSR. Initiative-taking risk management protects the reputation of a company by reducing the workplace hazards, data breaches or environmental damage, which maintains its trust in public for gaining competitive benefits, which is also a key part of CSR.
Conclusion and Tools for Risk Management
Risk management is not just a one-time task against threats and vulnerabilities affecting businesses, it is a critical and ongoing process of modern business management. Organizations face regulatory pressure, global changes and technological advancements, and cannot afford to run without structured risk control environment. Risk management enables organizations to implement and maintain combination of risk control techniques to enhance operational stability against unforeseen issues and continuous monitoring for emerging threats. As business environments changes rapidly, companies must remain vigilant and adaptive so their risk control efforts. An effective and strong risk control framework not only protects assets and reputation of a company but also builds trust between stakeholders and public.
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