Organization risk assessment deals with the risks and opportunities that affect value creation and preservation of an organizational entity. In other words, organization risk assessment deals with identifying potential risks that may arise from decisions or actions of a company’s management, its board of directors, or employees, and can threaten to affect the entire entity. In fact, organization risk assessment is a part of a company’s ongoing risk management process, where such risks are kept within the risk appetite, and all available resources are used to lessen risk in an efficient and cost-effective manner to ensure the achievement of the company’s objectives.

Thus, organization risk assessment deals with how companies and organizations assess risk, providing the basis for application across organizations, sectors and industries. It directly focuses on the achievement of objectives by an organization and defines the basis of organization risk management.

Achievement of Objectives

The management of an organization establishes management’s vision, objectives and strategy within the framework of its established mission and vision. The organization risk assessment framework of a company can be divided into four categories:

• Strategic: high level goals that support the mission of the organization
• Operations: effective and efficient use of existing resources
• Reporting: building a reliable reporting structure
• Compliance: complying with the existing laws and regulations of the organization

Components of Organization Risk Assessment

Organizational risk assessment consists of eight components. These are derived from the manner the management operates an organization and are closely included with the management procedure.

These components are:

• Internal Environment: The in-house atmosphere of an organization sets the tone of an organization, the basics of how people of the organization view and address risk, the risk management philosophy of the company, risk appetite and also the ethical values of the organization.

• Objective Setting: Management must lay down an objective for an organization and also identify the prospective events that can affect this objective. The management should also have a process to attain these objectives and it must align with the mission and risk appetite of the organization.

• Event Identification: Events affecting the internal and external achievement of an organization must be identified and distinguished.

• Risk Assessment: Risk must be assessed based on the risk appetite and response of the people in the organization. It is an ongoing process and not a one-time affair.

• Risk Response: The management should have a plan ready to response to risk. It should also align with the risk tolerance and risk appetite of the organization.

• Control Activities: There should be sound policies and procedures in place that help to implement and ensure that risk responses are properly carried out.

• Information and Communication: There should be effective communication regarding risk awareness factors across the length and breadth of the organization.

• Monitoring:  The risk assessment model must be monitored regularly and modified, if necessary.

So, all these factors should be kept in mind while crafting the organization risk assessment plan.