ERM: LESSON 3

Risk of loss resulting from inadequate or failed internal processes,people and systems or from external events.”

It includes legal risk but excludes strategic and reputational risk.

• the level of risk that exists in the absence of any controls or mitigation measures.

• It represents the potential for loss or harm before any actions are taken to manage or reduce the risk.

• the level of risk that remains after controls or mitigation measures have been implemented.

• Even after taking steps to reduce or manage inherent risk, some degree of risk typically persists.

• The process in which potential material risks are identified and recorded along with their related control

• ______ exercise should also focus on identifying and assessing future potential risks since most of the biggest operational risk losses arise from some new issues which are difficult to forecast. 

• ______ selection process starts by analyzing the already identified key risks as a result of RCSA exercises, audit reports, industry environment, and actual loss experiences.

• The analysis of past events helps in the identification and finding of the intermediate event or root cause event which led to the loss.