What does risk assessment involve in the context of internal auditing?

Risk assessment in the context of internal auditing is fundamentally about identifying and analyzing potential risks that could impact the organization's ability to achieve its objectives. This process involves systematically evaluating factors that might lead to negative outcomes, such as financial losses, regulatory non-compliance, or reputational damage.

The identification step focuses on recognizing various risks, including operational, financial, compliance, and strategic risks. Following identification, analysis takes place to evaluate the likelihood of these risks occurring and the potential severity of their impact on the organization. This thorough examination allows internal auditors to prioritize risks and recommend appropriate controls, mitigation strategies, and action plans aimed at minimizing adverse effects on the credit union.

This approach ensures that the organization can proactively address risks, maintain regulatory compliance, and ensure the availability of resources to support its mission and operational objectives. The effective management of risks is crucial for any organization's sustainability and is a key component of a robust internal audit framework.