What is the first step in the enterprise risk management model?

The first step in the enterprise risk management model is to identify risks. This foundational step is crucial because it involves recognizing all potential threats that could negatively impact an organization, including operational, financial, strategic, and compliance-related risks. By comprehensively identifying these risks, organizations can better prepare and implement strategies to mitigate them.

Understanding the specific risks faced enables a more targeted approach in subsequent steps of risk management. For example, without recognizing risks upfront, efforts to assess their probability and impact, implement mitigating controls, or evaluate existing directives would be rendered ineffective, as there would be no clear understanding of what needs to be addressed. Therefore, identifying risks sets the stage for a structured and systematic approach to managing risk effectively within the organization.