What is the first step in conducting a risk assessment?

The first step in conducting a risk assessment is identifying potential risks and their sources. This foundational step is crucial because it allows organizations to understand what specific threats or vulnerabilities exist that could negatively impact their objectives. By systematically identifying risks, organizations can create a comprehensive overview of the different types of risks they face—be they operational, financial, compliance-related, or reputational.

This initial identification process involves gathering information through various means, such as brainstorming sessions, expert consultations, past incident reviews, and analysis of historical data. Recognizing these risks is vital for effective prioritization and subsequent risk evaluation, enabling organizations to focus their resources and strategies where they are needed most.

The other options are part of the risk management process but come after the identification of risks. Developing a risk management plan, conducting a financial analysis, and implementing control activities are steps that rely on the outcomes of the initial risk identification. They are designed to either mitigate the identified risks or optimize decisions based on the identified potential threats, but they cannot occur effectively until the risks are understood.