Question

What do we mean by a risk? What are some examples of risks companies face?

• What are internal controls? What is the relationship between an internal control and a risk? Be able to identify internal controls that can be used to address specific risks.

Answer 1

Risk is the situation which involved exposure to the loss. Loss can be financial as well as non financial. Risk which company typically faces are risk of entry of new players, risk of loss of confedential information, risk of accidental damage due to use of our product to the customer, risk of theft.

Internal controls are the safeguards put in order to reduce the chances and level of risk which company faces. Relation between internal control and risk is same as of police and theif. Internal control acts like a safeguad to the company against risks. Higher the internal control, lower the risk. Some of the internal control example can be put into practice of segregation of duties to reduce the risk of wrong passing of transaction, one man would pass the entry where as another shall authorize it. Another example of internal control would be anti virus for protection against virus and malwares.