December 15, 2023

What is Risk Management?

Internal control risk management is a systematic process that organizations employ to identify, assess, mitigate, and monitor risks affecting their objectives. It entails establishing and maintaining internal controls that safeguard internal information assets, ensure accurate financial reporting, and promote compliance with laws and regulations.
Under risk management, security controls implemented on any information asset should align with its classification and the identified threats and vulnerabilities it faces. The risk assessment procedure outlines the methodology, responsibilities, and processes to assess risks as per the Confidentiality, Integrity, and Availability of information assets.

By Sankaran Krishnan, Assistant Vice President- Delivery, Path Infotech

Critical elements of the Risk Management process

  • Risk Identification: Start by assessing internal and external factors to identify potential risks impacting the organization’s goals.
  • Risk Assessment: Once you have identified the risks, they need to be evaluated and prioritized considering the possibility of occurrence and potential impact on the organization's operations, finances, or reputation.
  • Risk Response Planning: It involves determining strategies and action plans to minimize the threats and address the opportunities.
  • Risk Mitigation and Controls: Following the planning stage, implementing strategies and measures to mitigate or manage identified risks. This includes implementing internal controls, policies, procedures, and protocols to reduce the probability of risks materializing or to lessen their impact if they occur.
  • Monitoring and Review: Continuous monitoring and periodic reviews are imperative to ensure the effectiveness of established internal controls. Regular audits and evaluations help maintain the relevance and efficiency of controls.
  • Communication and Reporting: Ensure that relevant stakeholders are informed about risks, control measures, and any changes in the risk landscape. Regular reporting to management and the board is essential.
  • Compliance and Ethics: Embedding ethical values and ensuring compliance with laws and regulations into the organizational culture.

Why Risk Management?
Implementing robust risk management practices is essential for safeguarding assets, preventing fraud, maintaining compliance, and supporting organizational resilience. Reliable information about potential risks aids in making informed decisions.
Internal control risk management frameworks, such as COSO (Committee of Sponsoring Organizations of the Treadway Commission) and ISO 31000, provide guidance and best practices for organizations to establish and enhance their risk management processes, aligning controls with strategic objectives

Explore more to unravel the secrets of an internal control risk management system, enabling your organization to overcome challenges seamlessly and achieve objectives sustainably.


Disclaimer: The content presented in this blog post is sourced from Sankaran Krishnan’s original LinkedIn blog.