Ace the 2026 CGFM Exam – Turbocharge Your Path to Financial Mastery!

The correct choice focuses on the process of identifying potential events that could affect an organization's ability to meet its strategic objectives. This component, termed 'Event Identification,' specifically involves recognizing and considering both internal and external factors that might pose risks to the organization's goals. It is a foundational step in the Enterprise Risk Management (ERM) framework, as it sets the stage for further analysis and evaluation of risks.

Understanding events means looking beyond mere risks; it encompasses identifying various occurrences that could have positive or negative impacts. By meticulously identifying these events, organizations can better prepare and implement strategies to mitigate potential adverse effects on their objectives. This proactive approach is crucial in maintaining overall organizational resilience and achieving long-term success.

In contrast, the other components deal with different aspects of risk management. The 'Internal Environment' sets the tone for risk management and focuses on the organization's risk culture and governance. 'Risk Assessment' involves evaluating the identified risks in terms of their likelihood and potential impact. 'Control Activities' subsequently encapsulate the processes and policies developed to mitigate identified risks. Each of these components plays a role in the overarching ERM framework but does not specifically focus on the identification of potential events that can affect an organization’s objectives.