Learn how to conduct a risk assessment from start to finish, including risk identification, scoring, control evaluation, residual risk, appetite and treatment planning, using a realistic fintech case study.
Category: Risk Management
Introduction
Conducting risk assessments is one of the core responsibilities of a Governance, Risk and Compliance (GRC) analyst.
Whether assessing cybersecurity threats, operational disruptions, regulatory obligations, or third-party dependencies, the objective is broadly the same: understand what could affect the organisation's objectives and support informed decisions about how those risks should be managed.
However, a risk assessment involves much more than assigning likelihood and impact scores.
A defensible assessment requires an understanding of the business, clearly defined risk scenarios, relevant evidence, an evaluation of existing controls, and appropriate management decisions.
In this guide, we'll walk through a structured risk assessment using a fictional UK financial technology company, Meridian Financial Services Ltd.
By the end, you should understand how to perform and document an assessment, evaluate the results, and communicate your findings to stakeholders.
A risk assessment is a structured process for identifying, analysing, and evaluating risks that could affect organisational objectives.
It helps organisations answer questions such as:
Risk assessment is part of the wider risk management process described in frameworks such as ISO 31000.
Risk assessment typically consists of three related activities:
Risk identification: Recognising and describing relevant risks.
Risk analysis: Understanding the nature of each risk, including its likelihood, consequences, existing controls, and uncertainty.
Risk evaluation: Comparing the results of the analysis against established risk criteria to determine the significance of the risk and support decisions about further action.
These activities are related but should not be treated as interchangeable.
For example, calculating a risk score is part of risk analysis. Determining whether that score exceeds approved risk appetite is part of risk evaluation.
Before identifying risks, understand what is being assessed.
A risk assessment might cover an entire organisation, a business process, a technology platform, a project, or a specific third-party relationship.
Without a defined scope, the assessment can become unfocused and difficult to complete.
Meridian is a fictional UK fintech company with approximately 250 employees and 75,000 customers.
It provides cloud-hosted digital payment and wallet services.
Management has requested a risk assessment of the customer payment platform following several infrastructure changes.
The assessment scope includes:
The assessment excludes unrelated corporate systems unless their failure could materially affect the payment platform.
Before proceeding, establish:
A documented assessment scope and agreed risk criteria.
Practitioner insight: A technically detailed assessment can still be ineffective if it does not address the business decisions management needs to make.
Once the context is established, identify events or circumstances that could affect the objectives within scope.
Risk identification should draw on multiple information sources rather than relying solely on a generic checklist.
Stakeholder interviews
Speak with technology teams, business process owners, operations, compliance, and relevant third-party relationship managers.
Technical evidence
Review vulnerability assessments, architecture diagrams, incident records, access reviews, configuration reports, and monitoring information.
Business documentation
Examine business impact analyses, process maps, contracts, service-level agreements, and operational procedures.
Historical information
Consider previous incidents, audit findings, control failures, near misses, and emerging trends.
External information
Use relevant threat intelligence, regulatory publications, industry developments, and supplier assurance reports.
| Risk ID | Risk title | Potential risk event |
|---|---|---|
| R-001 | Privileged account compromise | Unauthorised access to payment infrastructure |
| R-002 | Cloud service disruption | Prolonged unavailability of payment services |
| R-003 | Third-party service failure | Interruption of a critical payment dependency |
| R-004 | Application vulnerability exploitation | Compromise of customer accounts or transactions |
| R-005 | Regulatory reporting failure | Failure to meet applicable reporting obligations |
These are illustrative examples, not an exhaustive list.
An initial list of relevant risks with enough context to support further investigation.
Each identified risk should be expressed as a clear, assessable statement.
A useful structure is:
Cause or contributing condition → Risk event → Potential business impact
Consider Meridian's cloud availability risk.
Weak statement:
Cloud outage.
Improved statement:
Following a significant disruption to the primary cloud environment, unverified disaster recovery arrangements could prevent the timely restoration of payment services, resulting in prolonged transaction disruption, financial losses, and contractual consequences.
This statement identifies the relevant scenario and explains why it matters to the business.
Every risk should have an accountable owner.
For Meridian's cloud availability risk:
Risk owner: Head of Technology
The risk owner is responsible for overseeing the exposure and ensuring that appropriate management decisions are made