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Risk assessment (business)

Business risk assessment identifies relevant risks, analyses their nature and significance and evaluates them against appropriate criteria. Likelihood and impact are often important, but timing, speed, uncertainty, dependencies and the effectiveness of existing controls can also matter. The assessment informs priorities and responses and is reviewed as conditions change. It differs from an auditor’s specific assessment of risks of material misstatement.

Worked example

A distributor assesses a warehouse flood risk by considering location, likely disruption, stock and customer effects, warning time and existing protections. It compares the remaining exposure with agreed criteria before deciding what further action is needed.

Common mistake

A colour or score is not a substitute for explaining assumptions and consequences. Distinguish inherent exposure from the exposure remaining after controls.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA SBL Direct September 2026–June 2027