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Is an internal methodology which is primarily focused on the inherent risk involved in the activities
or system and provide assurance that risk is being managed by the management within the
defined risk appetite level. It is the risk management framework of the management and seeks
at every stage to reinforce the responsibility of management and BOD (Board of Directors) for
managing risk.
Components of Risk
Inherent Risk
Control Risk
Detection Risk
Economic Factors
Technological Factors
Regulatory environment
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Risk Appetite
It is the amount of risk that an entity is willing to accept within its overall Capacity. It provides the
threshold of acceptable risk and determining the risk appetite is continuous process, it can't be
set once and leave. Risk appetite is developed on the basis of risk level of company like risk Hunger
Company may develop high risk appetite while risk averse company may develop low risk appetite
level.
Economic Factors
Technological Factors
Regulatory environment
The following aspects are to be considered while preparing the audit plan :
Definition and embedding of risk appetite is cornerstone in risk management processes but long
way to go before truly embedded.
Industry and regulator views that there is still a lot of work to be done