What is the purpose of "risk assessment"?

The purpose of "risk assessment" is primarily focused on the process of identifying, analyzing, and evaluating potential risks that could affect an organization or project. This approach allows financial planners and managers to understand the uncertainties in their financial environment and to develop strategies to mitigate those risks effectively.

By identifying potential risks, individuals can analyze the likelihood of each risk occurring and the potential impact it could have on financial performance or objectives. Evaluating these risks helps prioritize them based on their significance, allowing informed decision-making about how to address them.

This process is fundamental in financial planning and management, as it lays the groundwork for developing risk management strategies, ensuring compliance with regulations, and safeguarding assets. The insights gained from a thorough risk assessment can lead to better resource allocation, improved financial stability, and enhanced long-term success for the organization.