What is the first step in the three-step process for risk assessment?

The first step in the three-step process for risk assessment is risk identification. This initial phase involves recognizing and listing potential risks that could affect an organization's operations, assets, reputation, and financial health. By identifying risks, auditors and management can develop a clear understanding of what needs to be assessed further.

Risk identification lays the groundwork for subsequent steps. Once risks are identified, organizations can then measure the likelihood and potential impact of these risks, which is the next step in the process—risk measurement. Following that, risk prioritization occurs, where identified risks are evaluated against predetermined criteria to determine which ones require the most immediate attention or resources. Mitigation, while crucial, is not part of the initial risk assessment process; it comes after the risks have been identified, measured, and prioritized.

This systematic approach ensures that all potential risks are taken into account, allowing for informed decision-making and effective resource allocation aimed at minimizing negative impacts on the organization.