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Question: 1 / 875

What is the first principle of risk assessment?

Identify changes that could impact the system of internal control

Consider potential for fraud

Identify risks to achievement of objectives

Specify objectives with reasonable clarity

The first principle of risk assessment is to specify objectives with reasonable clarity. This principle establishes a foundation for the entire risk assessment process. When clear objectives are defined, it becomes easier to identify and understand the associated risks that could impede the achievement of those objectives. This clarity helps ensure that any risks assessed are relevant to the organization's goals, allows for better prioritization of risks, and assists in creating effective risk management strategies.

By articulating objectives clearly, organizations can systematically evaluate potential risks in relation to specific targets, leading to a more focused and effective risk assessment process. This step is crucial because without a well-defined set of objectives, it would be challenging to determine what risks need to be monitored or mitigated, and how they align with the overall mission and goals of the organization.

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