One of the most critical functions of risk management is probably the identification process. A failure to recognize the existence of one or more potential events can result in financial disaster. The importance of being able to anticipate the existence of the problem before it materializes is recognized by everyone but unfortunately there is no scientific method or systemic approach to the identification process.

Required:

Explain the eight factors an organization should consider when determining relevant risk criteria.

1. Its comfort level in accepting risk (appetite for risk)
2. The nature and types of consequences that can occur
3. Its definition of unacceptable risk
4. How likelihood will be defined and depicted
5. The immediacy of the risk and development of the consequences
6. Impact measured in financial or operational terms
7. Impact to its reputation and/or sustainability
8. How combinations of risks could affect it