Why is risk assessment an essential part of audit planning ?

Risk assessment results provides a clear picture on whether to continue with a project or not. It is always important to do a risk assessment at planning phase because:

•  A comprehensive risk assessment activity will help any organization understand the kind of threats it can be exposed to, the possible extent of damage and therefore the required steps for damage control. It is akin to an eye-opening exercise; a good Risk Analysis and Assessment helps throw insight into how each functional area of a business would be impacted in the event of a disaster and therefore, it also helps in prioritizing recovery plans based on the criticality of the functions.

  The most important function of a risk assessment process is to pre-determine the possible scenarios of disaster and then steps that the organization will take to recovery in the event of each. Listing out disasters is a challenging task, the list will never seem to be comprehensive enough and it will need constant updating. One way of handling this effectively is by using a good tool that will help you cover all kinds of disasters while working on risk assessment.

  Another important role Risk Assessment performs is ‘thinking through’ the worst-case scenario: the complete destruction of a business’s main or head office, its lifeline. It helps the business evaluate the extent of damage and think through the recovery process in the event of this worst-case scenario.

To ensure that projects run smoothly, effective project managers communicate their plan to the project sponsors, stakeholders and team members. This sets expectations to people who provide funding and are affected by the outcomes. It ensures that the project runs smoothly so one step proceeds to the next without disruption. By identifying, avoiding and dealing with potential risks in advance, you ensure that your employees can respond effectively when challenges emerge and require intervention.

By defining risk management processes for your company, you make success more likely by minimizing and eliminating negative risks so projects can be finished on time. This enables you to meet your budget and fulfill targeted objectives. When you don’t have risk management strategies in place, your projects get exposed to problems and become vulnerable. Effective risk management strategies allow your company to maximize profits and minimize expenses on activities that don’t produce a return on investment. Through detailed analysis, effective leaders prioritize ongoing work based on the results produced, despite the odds.

To evaluate your project’s success so you can use the best practices on your next project, assess the impact of your activities on mitigating exposure to problems and exploiting opportunities that capitalize on your company’s strengths. For example, if you develop and deliver a training program that creates awareness about internet security, including phishing, viruses and identity theft, measure the number of help desk calls received about these problems. If they go down, you can reasonably assume your risk management initiatives have contributed to success. If not, revise your training program