RISK ASSESSMENT AND INTRODUCTION TO INTERNAL CONTROL

INTRODUCTION - RISK ASSESSMENT

We face a variety of risks from external and internal sources that must be assessed. A precondition to risk assessment is establishment of objectives, linked at different levels and internally consistent.  Risk assessment is the identification and analysis of relevant risks to achievement of the objectives, forming a basis for determining how the risks should be managed.  Because economic, industry, regulatory and operating conditions will continue to change, mechanisms are needed to identify and deal with the special risks associated with change. 

There are risks inherent in any activity.  Smart managers know the potential impact and likelihood of occurrence of any number of risks, and put in place cost-effective controls to manage those risks.  External risks such as vendor fraud could compromise health and safety of staff, clients, students, patients, customers depending on the nature of business of such organization.  Internal risks such as employee incompetence, unsafe buildings or ailing computer systems also imperil an organization.. It is important to get your entire organization involved, including executives and your board.

Now, let us refer to what the new SEC (Securities and Exchange Commission, Nigeria) says in respect of Risk Assessment in Part A, chapter 10:

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