What is a risk assessment?

A risk assessment fundamentally involves identifying and evaluating risks that could potentially impact the compliance obligations of an organization. This process aims to recognize areas where risks may arise, such as regulatory breaches, financial vulnerabilities, or operational failures, and to appraise the severity and probability of these risks occurring.

The essence of risk assessment lies in its proactive approach; it helps organizations to mitigate hazards before they result in significant issues. By evaluating risks, organizations can implement appropriate controls or strategies to manage or reduce identified risks, ensuring they meet compliance requirements effectively and safeguard their operations.

The focus on evaluating compliance risks differentiates it clearly from other activities such as advertising compliance programs, which is more about promoting awareness rather than assessing risk, or conducting a financial audit, which centers on evaluating financial data rather than specifically dealing with compliance issues. Enhancing employee performance is also unrelated, as it pertains more to workforce management than compliance risk. Thus, identifying and evaluating risks related to compliance is central to what a risk assessment entails.