Risk
Assessment
ØIdentified risks
need to be put into perspective in terms of the potential severity of impact
and likelihood of their occurrence. Assessing and categorizing risk assists in
prioritizing and filtering the risks identified and establishing further
action (if any) required and at what level. One method is to consider each
identified risk and decide for each the likelihood of it occurring and the
severity of the impact of its occurrence on the bank.
ØRisk Officer of
concerned department considers using a scoring system to assess which risks
need further work. For example, severity of impact could be scored from
1(Negligible) to 5 (Disastrous) and similarly the likelihood of occurrence
could be scored from 1 (remote) to 5 (certain). The impact score is usually
multiplied by the score for likelihood and the product of the scores used to
rank those risks that the responsible authorities regard as most serious. In
this way, every identified risk of a department can be fit into the following
risk matrix.