vaayaa Inclusive Education
Professional risk assessment

Insurance, Risk and Audit Advisory Risk Assessment: Controls, Conduct and Reporting Risks

A worked example of how an advisory team identifies, scores and controls the risks behind insurance placement, risk reporting and audit work, from liquidity and valuation uncertainty to data exposure and conflicts of interest.

Updated November 2026 8 hazards assessed Review every 6 months Highest risk: Critical to Medium
See the Insurance, Risk and Audit Advisory course

Executive summary

This assessment shows how an insurance advisory and audit team can find, rate and control the risks that affect the quality of its advice and the trust clients place in it. Eight risks were chosen because they are plausible in everyday placement, reporting and audit work. Data and cyber exposure and transaction errors are the most likely, while fraud over client premiums and claims payments is less likely but causes serious harm. Each risk is scored before controls and again after existing and added controls. Most risks fall to Medium or Low once added controls are in place, but cyber exposure stays at Medium because the impact on client data remains serious. The first actions are a split of duties for payments, a tested restore of the client platform, a dated reconciliation routine and a written independence check. Every score illustrates method, not a real organization.

Focus area
Insurance, risk management and audit advisory
Setting
Advisory team supporting insurance buyers, risk managers and audit clients in a mid-sized professional services firm
Method
Five by five likelihood and impact risk register

Scope

This assessment covers an advisory team that places insurance for clients, reviews their risk registers, and supports internal audit and assurance work. It looks at risks to the accuracy of advice, client money and premiums, client data, professional standing and legal duties. It does not cover any real client, insurer or regulator. Jurisdiction, licensing regime, systems and client base are assumptions made for teaching only.

Context

The team has a practice lead, two advisers who negotiate placements, an audit manager, a claims liaison and an IT administrator who supports shared drives and the client portal. Advice is given in writing, premiums and claims pass through a designated client account, and risk registers and audit working papers are stored on a shared platform. Each risk is scored before controls to show its natural level, then again after the existing controls and the controls that should be added.

Objectives, assets and stakeholders

The objective is to give accurate and independent advice, protect client money and data, meet professional and legal duties, and keep the confidence of clients, insurers and regulators. The assets in scope are client premiums and claims funds, placement records, risk registers and audit working papers, client personal and commercial data, the shared platform and the professional reputation of the team. Stakeholders include the advisers and audit staff, the practice lead and board, clients, insurers, claimants, the professional regulator and the tax authorities. Clear ownership matters: every risk has one owner role, and the practice lead keeps the register current and reports to the board each quarter.

Risk matrix: before and after controls

Each cell shows hazard numbers placed by likelihood and impact. Compare the two grids to see how controls move each hazard.

Before controls

Inherent risk

Risk before controls: rows are likelihood from almost certain to rare, columns are impact from insignificant to catastrophic. Cells list hazard numbers.
1
Insignificant		 2
Minor		 3
Moderate		 4
Major		 5
Catastrophic
5 Almost certain
4 Likely Likelihood 4, impact 3, score 12, high: H03 Likelihood 4, impact 5, score 20, critical: H08
3 Possible Likelihood 3, impact 3, score 9, medium: H02 Likelihood 3, impact 4, score 12, high: H01 H07 Likelihood 3, impact 5, score 15, high: H04 H05
2 Unlikely Likelihood 2, impact 5, score 10, high: H06
1 Rare

After controls

Residual risk

Risk after controls: rows are likelihood from almost certain to rare, columns are impact from insignificant to catastrophic. Cells list hazard numbers.
1
Insignificant		 2
Minor		 3
Moderate		 4
Major		 5
Catastrophic
5 Almost certain
4 Likely
3 Possible
2 Unlikely Likelihood 2, impact 2, score 4, low: H03 H07 Likelihood 2, impact 3, score 6, medium: H01 H02 H04 H06 Likelihood 2, impact 4, score 8, medium: H05 H08
1 Rare
  • Low 1 to 4
  • Medium 5 to 9
  • High 10 to 16
  • Critical 17 to 25

Hazard register

A summary first, then the detail for each hazard.

Summary of hazards with scores before and after controls
No.HazardBeforeAfterOwner
H01 Liquidity and counterparty exposure around client money 12 High 6 Medium Treasury lead
H02 Valuation and reserving uncertainty in advice 9 Medium 6 Medium Senior adviser
H03 Transaction processing and reconciliation errors 12 High 4 Low Financial controller
H04 Access control and segregation of duties 15 High 6 Medium Practice lead
H05 Fraud and misappropriation of client money and claims 15 High 8 Medium Audit manager
H06 Conflicts of interest and advisory conduct 10 High 6 Medium Compliance officer
H07 Tax, reporting and governance duties 12 High 4 Low Company secretary
H08 Data quality and cyber exposure 20 Critical 8 Medium IT administrator
H01

Liquidity and counterparty exposure around client money

Financial Before 12 After 6

Insurers, brokers or premium finance providers fail or pay late, and client money is held too long or is unavailable when claims and premiums fall due, so the firm cannot meet its obligations.

Who or what is affected: Clients, insurers, claimants and staff

Causes

Concentration in a few insurers, long settlement cycles and cash forecasts that are rarely updated.

Consequences

Late payments to claimants, breach of client money duties and loss of insurer trust.

Existing controls

  • Premiums are paid through a designated client account.
  • Insurers are checked against a list of approved carriers.

Control gaps

Counterparty exposure is reviewed only once a year, and forecasts are not compared with actual settlements.

Additional controls

  • Prevent: Set exposure limits per insurer and review them each quarter.
  • Respond: Agree a standby funding arrangement and a payment priority order for shortfalls.
Likelihood 3 x impact 4 before; 2 x 3 after Owner: Treasury lead Target: Within 60 days Early warning: Client money held beyond agreed settlement dates for more than 10 days.
H02

Valuation and reserving uncertainty in advice

Strategic Before 9 After 6

Advice on premium levels, loss estimates or asset values rests on optimistic assumptions, so cover is under-insured or reserves are misstated when conditions change.

Who or what is affected: Clients, insurers and audit clients

Causes

Reliance on one data source, pressure to win business and assumptions that are not revisited.

Consequences

Under-insurance, poor client decisions, later disputes and reserve adjustments.

Existing controls

  • Modelled values are reviewed by a senior adviser before issue.
  • Key assumptions are recorded in the file note.

Control gaps

Past estimates are not compared with outcomes, so bias goes unseen.

Additional controls

  • Prevent: Test each valuation against a low and a high case before advice is issued.
  • Detect: Compare past estimates with actual losses and report material differences.
Likelihood 3 x impact 3 before; 2 x 3 after Owner: Senior adviser Target: Within 90 days Early warning: A reserve or valuation change above the usual range for the same class of business.
H03

Transaction processing and reconciliation errors

Operational Before 12 After 4

Premiums, endorsements or claim payments are keyed to the wrong policy, client or period, and reconciliations are not completed on time, so records and client statements carry errors.

Who or what is affected: Clients, claimants and finance staff

Causes

Manual entry, heavy renewal peaks and reconciliations that depend on one person.

Consequences

Wrong client statements, overpayments, delayed claims and complaints.

Existing controls

  • Each placement is checked against the signed instruction before binding.
  • Monthly statements are sent to clients for review.

Control gaps

Small endorsements are not checked and unmatched items can sit for months.

Additional controls

  • Prevent: Use a checklist with dual keying for premium and claim payment amounts.
  • Detect: Run exception reports for unmatched items, late postings and duplicate references.
Likelihood 4 x impact 3 before; 2 x 2 after Owner: Financial controller Target: Within 45 days Early warning: Unmatched client money items older than 30 days.
H04

Access control and segregation of duties

Technology and data Before 15 After 6

One person can set up a payee, approve a payment and release funds, or has wider platform access than the role needs, so errors and misuse go unseen by others on the team.

Who or what is affected: Staff, clients and payees

Causes

Small team, shared passwords and rights that are added but never removed.

Consequences

Undetected error or misuse, loss of client funds and failed audit findings.

Existing controls

  • Users sign in with individual accounts.
  • Payments above a set limit need a second approval.

Control gaps

Access rights are reviewed only when someone leaves or complains.

Additional controls

  • Prevent: Map each role to permissions and remove any combination that lets one person create and release a payment.
  • Detect: Review user access and approval logs each quarter and record the outcome.
Likelihood 3 x impact 5 before; 2 x 3 after Owner: Practice lead Target: Within 30 days Early warning: A user who holds both approval and release rights for client payments.
H05

Fraud and misappropriation of client money and claims

Financial Before 15 After 8

Fake payees, altered bank details, inflated claims or diverted premiums take money from clients and the firm, often over a long period in small amounts that are hard to spot.

Who or what is affected: Clients, insurers, claimants and employees

Causes

Trust placed in one person, pressure to meet targets and weak checks on payee changes.

Consequences

Direct loss, claims against the firm, reputational harm and a breakdown in client trust.

Existing controls

  • Payee bank detail changes are confirmed by phone.
  • Claims above a set value need a senior adviser sign off.

Control gaps

Payment matching is done on a sample, so small repeated payments can pass unnoticed.

Additional controls

  • Prevent: Verify new payees and bank changes through a call to a known contact before any payment.
  • Respond: Freeze related payments, preserve records and inform the practice lead at once.
Likelihood 3 x impact 5 before; 2 x 4 after Owner: Audit manager Target: Within 30 days Early warning: A payee bank detail change that is not confirmed by a call back.
H06

Conflicts of interest and advisory conduct

Reputational Before 10 After 6

An adviser has a personal or business link to an insurer or client, or is pressed to recommend a product that pays a higher commission, which weakens the independence of the advice.

Who or what is affected: Clients, insurers and the public

Causes

Long relationships with insurers, commission incentives and unclear rules on gifts.

Consequences

Unsuitable advice, loss of independence, complaints and disciplinary action.

Existing controls

  • A code of conduct is signed each year.
  • Staff declare outside interests when they join.

Control gaps

Declarations are collected but never compared against current engagements.

Additional controls

  • Prevent: Require a written independence check before each engagement and record commission on every recommendation.
  • Detect: Sample recommendations each quarter to test fit with the client need and the disclosed interests.
Likelihood 2 x impact 5 before; 2 x 3 after Owner: Compliance officer Target: Within 60 days Early warning: A declared interest linked to an open engagement or placement.
H07

Tax, reporting and governance duties

Legal and compliance Before 12 After 4

Filing deadlines, disclosure rules or tax treatments of client premiums are missed or misapplied, and the board lacks the information it needs to oversee the firm's obligations.

Who or what is affected: Board, clients, regulators and staff

Causes

Rules that vary by jurisdiction, a small team and filings prepared at the last minute.

Consequences

Penalties, interest, restated figures and loss of regulator trust.

Existing controls

  • A calendar lists the main filing dates.
  • Governance reports go to the board each quarter.

Control gaps

Jurisdiction is assumed and no one confirms current rules before a filing.

Additional controls

  • Prevent: Keep a compliance calendar with an owner and a backup owner for every duty.
  • Recover: Correct any late or wrong filing within a set period and record the lesson learned.
Likelihood 3 x impact 4 before; 2 x 2 after Owner: Company secretary Target: Within 30 days Early warning: A filing due within 10 days that has no named preparer or reviewer.
H08

Data quality and cyber exposure

Technology and data Before 20 After 8

Phishing, weak passwords and client files copied to unprotected drives expose personal and commercial data, while poor master data and manual transfers between systems create errors in advice and reports.

Who or what is affected: Clients, claimants, staff and insurers

Causes

Phishing, reused passwords and spreadsheets copied between people.

Consequences

Stolen client data, false payments, report errors and a regulator notice.

Existing controls

  • The shared platform needs a password and is backed up daily.
  • Staff are told not to send client files by public links.

Control gaps

Spreadsheets used for key figures sit outside the access controls.

Additional controls

  • Prevent: Enable multi-factor sign in and restrict client data downloads to managed devices.
  • Detect: Monitor sign in alerts and review phishing reports from staff each week.
  • Recover: Test restoring client data from backup each quarter and keep a written recovery plan.
Likelihood 4 x impact 5 before; 2 x 4 after Owner: IT administrator Target: Within 30 days Early warning: Repeated phishing reports or payment request scams reaching the finance mailbox.

Rating method and evaluation

Each risk is rated on two five-point scales. Likelihood runs from Rare to Almost certain, and impact runs from Insignificant to Severe. Multiplying the two gives a score from 1 to 25, which falls into one of four bands: Low from 1 to 4, Medium from 5 to 9, High from 10 to 16 and Critical from 17 to 25. The score guides the order of work and is not a measurement. Inherent risk is the score before any controls. Residual risk is the score after existing and added controls, and it can never be higher than the inherent score. Impact is judged on money lost, client harm, effect on advice and audit opinions, time to correct and damage to trust. A risk is not rated down only because it has not happened yet. Anything still High needs senior attention and a dated plan, anything Medium needs routine controls with a named owner, and anything Low is accepted and watched. Practitioners who do the work should challenge the ratings, and the register is reviewed whenever an indicator reaches its threshold or an internal audit finding is raised.

Likelihood, impact and rating bands

Likelihood

  • 5 Almost certain: Expected to happen in most circumstances.
  • 4 Likely: Will probably happen in many circumstances.
  • 3 Possible: Could happen at some time.
  • 2 Unlikely: Not expected, but it could happen.
  • 1 Rare: Only in exceptional circumstances.

Impact

  • 1 Insignificant: No lasting effect. Handled within routine work.
  • 2 Minor: Small effect that is quickly corrected.
  • 3 Moderate: Noticeable effect that needs managed effort to correct.
  • 4 Major: Serious effect on people, delivery or reputation.
  • 5 Catastrophic: Severe or lasting effect that threatens the whole activity.

Bands (likelihood x impact)

  • Low (1 to 4): Accept and monitor.
  • Medium (5 to 9): Manage with routine controls.
  • High (10 to 16): Senior attention and a treatment plan.
  • Critical (17 to 25): Act first. Do not proceed until reduced.

Monitoring, escalation and review

Review this assessment every 6 months, and sooner when an indicator below reaches its threshold.

Early-warning indicators and escalation thresholds
Indicator to watchEscalate when
Client money reconciling items older than 30 days.Escalate to the financial controller when any item is older than 30 days, and to the practice lead after 60 days.
Payee bank detail changes made without a call back to a known contact.Escalate to the audit manager at once, and hold the payment until it is confirmed.
Users who hold both approval and release rights for client payments.Escalate to the practice lead when any such user is found, and remove one right within a week.
Client data restore tests not completed in the last quarter.Escalate to the IT administrator at once, and to the practice lead if the test is still open after 14 days.
Declared interests linked to an open engagement or client.Escalate to the compliance officer before the engagement proceeds, and record the decision.

Contingency arrangements

If a serious event occurs, such as confirmed misappropriation of client funds, a data breach or a placement that cannot be bound on time, the practice lead stops related payments and preserves records. The IT administrator isolates affected accounts and restores client data from the latest tested backup. Professional indemnity, legal and regulator contacts are made through the practice lead as required in the relevant jurisdiction. Affected clients and insurers are told early, plainly and in writing, and a standby plan keeps cover in force while the matter is investigated.

Prioritized action plan

  1. Split approval and release of client payments and remove any user who can do both, owner practice lead, within 30 days.
  2. Verify changes to payee bank details by call back to a known contact, owner audit manager, within 30 days.
  3. Enable multi-factor sign in and test a restore of client data from backup, owner IT administrator, within 30 days.
  4. Introduce a dated monthly reconciliation of client money with sign-off, owner financial controller, within 45 days.
  5. Run a written independence check before each engagement and record the outcome, owner compliance officer, within 60 days.

Conclusion

Reliable advice rests on a few steady habits: split duties for money, dated reconciliations, independence checks before each engagement, tested backups and a clear route for raising concerns. The highest scores sit with cyber exposure, fraud and transaction errors, and each has actions that bring the residual score down. Treat the register as a living record, review it on the stated cycle, and seek qualified advice for any real insurance, audit, tax or legal question.

Assumptions and limitations

Assumptions

  • The team is regulated for insurance advice in its jurisdiction, which is not specified, so legal duties are described in general terms only.
  • Client money passes through a designated account that is reconciled each month by a separate finance function.
  • Staff use managed laptops and a shared platform with individual logins, which is an assumption made for teaching.

Limitations

  • The scores are examples for learning and do not describe any real firm, client or insurer.
  • Insurance, audit and conduct rules differ by country and change over time, so specialist review is needed.
  • This is educational content and is not insurance, legal, audit or financial advice.

Related frameworks to study

  • Three lines model of risk ownership
  • Internal control framework with control activities and monitoring
  • Hierarchy of controls

Professional Risk Assessment

China, India, United States, Indonesia, Pakistan, Nigeria, Brazil, Bangladesh, Russia, Japan, Mexico, Philippines, Vietnam, Egypt, Turkey, Germany, United Kingdom, France, Italy, Canada, South Korea, Australia, Spain.

For Learning Reference Only: This assessment demonstrates how risk assessment principles are applied in a practical setting, providing a useful reference for learning and understanding. Actual assessments may be adapted to suit specific site conditions and circumstances.

Keep learning

Study the subject behind this assessment.

Insurance, Risk and Audit Advisory course Read the best practices for this course

More Professional risk assessments

Hourly Active: 45,552 Learners