preview

Risk Assessment : An Organization 's Internal Environment

Better Essays
Risk assessment represents a systematic process for identifying and evaluating events that could affect the achievement of objectives. These events can be identified in the external environment and within an organization’s internal environment. Once these events conflict with an organization’s objectives they become risks. In other words, risk can be described as “the possibility that an event will occur and adversely affect the achievement of objectives.” (Integrated Framework, 2004, p.16.)
In the current global economic environment, identifying, managing, and exploiting risk across an organization has become increasingly important to the success and longevity of any business. Businesses now view risk as a necessary failure that
…show more content…
A risk assessment process starts and ends with specific business objectives that are anchored in key value drivers. These objectives provide assistance with the impact and probability of risk ratings.
Two types of risk assessments are qualitative and quantitative. Qualitative assessments are considered to be the most basic form of risk assessment. They can be categorized as potential risks based on either nominal or ordinal scales. In other words, they can be classified by category versus ranked in comparison with one another. On the other hand, quantitative risk assessments are used to calculate objective numeric values for each of the components gathered during the risk assessment and cost benefit analysis.
Using qualitative or quantitative assessments in benchmarking can help with comparing risk information across organizations, such as within an industry group or related to a certain issue (e.g., compliance with a new regulation). Meaningful analysis in this regard requires availability of relevant and timely data from peer organizations.
Risk assessment can be performed at various levels of the organization. The scope of the risk assessment usually is determined by the objective and events. Examples of frequently performed risk assessments include: strategic, operational, compliance,
Get Access