What is Enterprise Risk Assessment?
An enterprise risk assessment, sometimes referred to as enterprise risk management, is a series of processes that aim to identify, assess, and address the risks of an enterprise. This involves looking at an enterprise from top to bottom and analyzing every aspect to accurately perform a risk assessment fit for the organization.
The main purpose of an enterprise risk assessment is to identify, analyze, and mitigate potential risks that could impact their objectives. It encompasses a comprehensive evaluation of internal and external factors that might hinder the achievement of organizational goals. It provides a structured framework for businesses to anticipate and respond effectively to potential threats.
By identifying risks early on, companies can proactively devise strategies to navigate challenges, ensuring long-term sustainability. Performing regular enterprise risk assessments can also ensure that you create and implement the necessary control measures, as well as stay compliant with all applicable standards.
What are Enterprise Risks?
Some of the most common risks that enterprise risk assessments address include the following:
- Potential hazards to workers
- Possibility of emergencies that can happen anytime
- Financial issues
- Possible threats to the organization’s reputation
- Operational and strategic risks
Enterprise Risk Assessment Frameworks
An enterprise risk assessment works similarly to other forms of risk assessment, following these steps:
- Identifying risks
- Assessing impact
- Evaluating likelihood
- Treating the risk
However, it is important to note that certain procedures may be different for enterprises due to their larger size. Following this, it is common to have smaller and more targeted risk assessment frameworks as part of the overall enterprise risk assessment. Some of these frameworks are the following:
- Compliance risk frameworks, which aim to identify, address, and mitigate risks related to laws and standards
- Strategic risk frameworks, which aim to address risks associated with a company’s plans for the future
- Operational risk frameworks, which deal with mitigating and reducing risks involved in the organization’s daily operations
In some cases, companies, associations, and countries have their own enterprise risk assessment frameworks to follow. Some of these are the Australian government and multiple American companies under the Committee of Sponsoring Organizations of the Treadway Commission (COSO).