Management's identification and analysis of risk is an ongoing process and is a critical component of effective internal control. An important first step is for management to identify factors that may increase risk. Identify factors, observable by management, which may lead to increased risk in a typical business organization. And provide examples for each

Risk is made up of two parts:

<> The probability of something going wrong,

<> The negative consequence if it does.

If you are hit by risk & you aren't prepared for that then the company's future can be on the line.

This makes risk analysis a very important tool. It can help the company to identify risk & be prepared for it.

What is Risk Analysis:

It's a process that helps the company to identify risk and be well prepared for it. For carrying out the risk analysis the first thing a company should do is identify the possible threats & estimate the damage it can do if it occurs. Then prepare the company in advance for such threats.

When to Use Risk Analysis:

Risk analysis can be useful in many situations. For example,

<> To anticipate & reduce the effect of harmful results from adverse events

<> When you are planning for projects

<> Evaluate whether the potential risks of a project are balanced by its benefits to aid in the decision process when evaluating whether to move forward with the project.

<> Identify the impact of & prepare for changes in the enterprise environment including the likelihood of new competitors entering the market or changes to Govt. regulatory policies.

<> For improving safety & managing potential risks.

Benefits of Using Risk Analysis:

<> identify rate & compare the overall impact of risks to the organization in terms of both financial & organizational impacts.

<> Identify the gaps in security and determine the next steps to eliminate the weakness and strengthen security.

<> Enhance communication and decision making processes as they relate to information security.

<> Put security controls in place to mitigate the most important risks.

<> Understand the financial impacts of risks.

Factors Leading to Increased Risk in an Organization:

<> Failure to meet the prior objective:

<> Decreasing quality of personnel

<> Increasing geographic dispersion of company operations

<> Increasing significance and complexity of core business processes

<> Introduction of new information technologies & entrance of new competitors.