We are operating in an environment where change is occurring at an unprecedented pace. With a constantly shifting global landscape and emerging geopolitical uncertainties, risk assessment has evolved from a periodic exercise into an organizational necessity — requiring far greater frequency and rigor than before. This raises a fundamental question: What constitutes a risk? 

What is a risk?

Broadly, risk can be defined as a function of the potential impact of an event and the likelihood of its occurrence.

In defining what should be classified as a risk, it is increasingly evident that historical assumptions no longer hold true. The need to continuously update and refine the list of emerging risks has grown significantly. Traditionally, risk registers focused primarily on the organization’s “known” risks — such as siloed business processes, geopolitical challenges and annual updates to risk registers, employee dissatisfaction and routine training requirements. However, this approach leaves a critical gap: the known unknowns.

As new and evolving risks continue to surface, the process of identifying and evaluating the full spectrum of potential threats has become substantially more complex. The rapid advancement of AI has introduced additional categories of risk, including misinformation, privacy vulnerabilities, AI system failures, unsafe human–computer interaction and even biosecurity concerns.

Once an organization develops a comprehensive and dynamic inventory of risks — encompassing both known risks and emerging threats — it becomes far more manageable to conduct targeted assessments across each risk category.

How do you categorize and mitigate risk?

Categorizing risks is essential for organizing them into a structured framework. Once risks are grouped appropriately, they can be analyzed based on their specific characteristics. Organizations must understand where their vulnerabilities lie and evaluate the potential impact if those vulnerabilities were to materialize. In most cases, risks originate within core business processes. Establishing a clear mapping between each risk category and its corresponding business area or technical domain further streamlines identification and mitigation efforts. This approach enables organizations to determine whether a risk affects a single function or spans multiple areas, and to assess its overall impact.

Another effective method of categorization is to align risks with functional business domains — such as legal exposure, regulatory restrictions, financial liabilities or technical limitations — and then map the underlying process-level risks to these categories. Such classification supports the identification of inherent risks within business processes. Once inherent risks are identified, the next step is to determine the appropriate controls to manage or mitigate them.

Risk mitigation requires implementing controls — measures designed to reduce both the likelihood and the impact of identified risks. Controls may take various forms, including procedural safeguards, protective mechanisms, isolation techniques, substitution or complete elimination of the risk source. The nature and application of these controls often vary across industries.

A key consideration is determining which controls are robust and which may be susceptible to failure. This raises the important question of how to evaluate the strength of a control within a business process. The answer lies in examining the control’s inherent properties, the rigor of its operational steps and its capacity to withstand unforeseen threats.

Controls may operate independently, in combination with other controls or in a layered manner to fully mitigate a risk. However, a single control can become a “single point of failure” if it breaks down and lacks a secondary, compensating control. Implementing multiple controls can significantly reduce the overall impact of a risk event, even when the likelihood of occurrence is high. In some cases, depending on their risk appetite, organizations may choose to transfer or accept certain risks rather than mitigate or reduce them.

What can you do to make an accurate assessment of risks in your ecosystem?

Risk assessment relies on expert judgment, subjective evaluation, technological tools, automation and applicable industry benchmarks. Establishing a comprehensive risk framework grounded in industry standards and supported by structured scoring models helps create a consistent baseline for assessment. Clearly mapping risks to the underlying assets, data flows, systems and process dependencies further enhances accuracy.

Incorporating multiple sources of risk input — such as recurring incidents, historical issues, vendor assessments, audit findings and change-management violations — helps surface ongoing operational vulnerabilities. Regular engagement with subject-matter experts can reveal blind spots that might otherwise go unnoticed. Conducting continuous risk assessments, rather than relying solely on an annual cycle, provides far greater visibility and responsiveness.

Technology and automation play a critical role in strengthening this process. Automated dashboards offer real-time insight into risk trends and remediation progress. Similarly, automated control-testing mechanisms improve accuracy and reduce manual effort and error.

A more advanced automated approach involves performing weighted analyses of controls and designing quantitative risk-assessment models based on control attributes. In this method, each control is evaluated uniquely according to its properties, with variations in control ratings reflecting their actual ability to mitigate specific risks. This approach can also expose design weaknesses or deficiencies in operating effectiveness, due to existing issues, thereby adjusting the control’s true value. A quantitative model, supported by decision-making rules, enables organizations to determine their overall risk posture with greater precision.

In short, accurate risk assessment requires a comprehensive view of the ecosystem, validated data, strong governance, collaboration and continuous monitoring. The time for this ecosystem approach has now come, given we live in what experts in the Pentagon call an increasingly volatile, uncertain, complex and ambiguous (VUCA) world.

[Kaitlyn Diana edited this piece.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.