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BUSINESS PROCESSES AND RISKS

What is a business process? A set of connected activities linked with each other for the
purpose of achieving an objective.

Three types of business activities:


1. Operating processes

2. Support processes

3. Projects

Understanding Business Processes


For internal auditors to add value and improve an organization’s operations, they must
first understand the organization’s business model. The business model includes:
1.

2.

Key business process - considered “key” if failure of process to function effectively


would directly result in organization not meeting the objective

Two approaches to understand business model and key processes:


1.

2.
Case: @Luv4U is an online dating service. The company seeks to provide a quality
service to its customers, offering a “personal” touch to the matchmaking process, and
they advertise that they will help their customers find the love of a lifetime. After paying
a registration fee, customers complete an online form that measures their lifestyle
preferences and personality traits. A complicated matching system finds a small
number of possible matches, and a professional “matchmaker” uses “intuition” to
determine the perfect couple. The matchmaker then sends names and email addresses
to each of the participants. If the customers are satisfied with their match, they pay an
additional fee to the service.

REQUIREMENT 1: Determine the key business processes at @Luv4U.

Once each process is identified, the next step is to determine the key objectives of the
process.
 Why does the process exist?
 How does it support strategy and contribute to success?
 How are people expected to act?
 What else does the process do that is important?

Documenting Business Process


Two commonly used methods for documenting processes:
1.

2.

REQUIREMENT 2: Prepare a flowchart of one process at @Luv4U.

Business Risks
The next step is to evaluate the business risks that could impede the accomplishment of
the objectives. A common approach is to “brainstorm” to list the possible risks.

REQUIREMENT 3: Prepare a list of possible risks at @Luv4U.


Risks are a combination of:
1.

2.

REQUIREMENT 4: Number each of the risks listed in Requirement 3. Place each


number in the appropriate cell in the table below.

RISK ASSESSMENT MODEL

Extreme

High
IMPACT

Medium

Low

Negligible

Remote Unlikely Possible Probable Certain


LIKELIHOOD

Responses to Risk

1.

2.

3.

4.