What is the first step that credit union management must perform as part of a risk assessment?

The first step that credit union management must perform as part of a risk assessment process is to identify the risk. This initial step is crucial because it lays the foundation for all subsequent actions in the risk management framework. Identifying risks enables management to recognize potential vulnerabilities and threats that could negatively impact the credit union, such as operational, financial, compliance, or reputational risks.

By pinpointing these risks early, management can prioritize them based on their likelihood and potential impact. This prioritization is essential for effectively allocating resources and developing strategies to mitigate or manage those risks. Identifying risks involves gathering information from various sources, including internal data, industry trends, and insights from stakeholders, ensuring a comprehensive understanding of the risk landscape.

Once risks are identified, other steps in the risk assessment process, such as measuring and assessing risk, controlling risk, and reviewing and monitoring risk, can follow. However, without the identification of risks being the starting point, the entire risk management process lacks focus and direction.