The component of Enterprise Risk Management that is the most critical is risk assessment. The term risk often comes from a negative connotation. Hagen (2018) states, that the most common use of the term risk is one of loss. Conducting a risk assessment allows management to identify threats, impacts and crucial risks that should be considered when pursuing the objectives and mission within an organization. Risk management tools such as a risk assessment, strengthens the relationship between risk awareness and risk management effectiveness (Braumann, 2018). The process of a risk assessment should include measures such as assessing the events of the previous year, identify if any risks have increased, determine if any risks have decreased, evaluate controls for all risks, and identify any potential new risks. A risk assessment allows the identification of the likelihood of potential risks and determination of required actions that need to be taken. The systematic, step-by-step risk assessment can be viewed as the foundation of the enterprise risk management process.
The Bible teaches us in Proverbs 22:3, that a prudent person foresees danger and take precautions. The simpleton goes on blindly and suffers consequences (
English Standard Version
,
2021). As Christians, this teaches us the importance taking adequate precautions in order to proactively address risk.
References
Braumann, E.C. (2018). Analyzing the role of risk awareness in enterprise risk management.
Journal of Management Accounting Research, 30
(2), 241-268.
Hagen, B.W. (2018). Problem, risk, and opportunity enterprise management: How to use
language, data, information, and analytics that easily align with the ways we think. Probabilistic Publishing.
