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Finance risk assessment

Enterprise and Financial Risk Management Risk Assessment: Controls, Fraud and Exposure Risks

A worked example of how a finance function identifies, scores and controls the enterprise risks that threaten accurate reporting, cash, compliance and trust in the numbers.

Updated November 2026 8 hazards assessed Review every 6 months Highest risk: Critical to Medium
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Executive summary

This assessment shows how a finance function can find, rate and control the enterprise and financial risks that matter most to accurate reporting, cash and trust. Eight risks were chosen because they are plausible in everyday finance, audit and governance work. Transaction errors and cyber exposure are the most likely, while fraud carries the greatest single impact. Each risk is scored before controls and again after existing and additional controls. Most risks fall to Medium or Low once controls are in place, but fraud remains Medium because its impact stays serious. The first actions are a dated close checklist, split duties for payments, call back checks on bank detail changes and a tested backup. Every score illustrates method, not a real organization.

Focus area
Enterprise and financial risk management
Setting
Finance function of a mid-sized organization with enterprise risk oversight and an annual external audit
Method
Five by five likelihood and impact risk register

Scope

This assessment covers enterprise and financial risk within a mid-sized organization, from transaction processing and reconciliation to reporting, tax and governance duties, credit and liquidity, valuation and board oversight. It looks at risks to accuracy, assets, legal duties and trust. It does not provide treasury, tax or investment advice for any real organization. Jurisdiction, sector, size and systems are assumptions made for teaching.

Context

The organization has a chief financial officer, a financial controller, an accounts team, a treasury function and an IT team that supports the finance system. Transactions are recorded in a finance system, with spreadsheets used for forecasts and some reconciliations. An external auditor reviews the accounts each year and a board audit committee receives quarterly risk reports. Each risk is scored before controls to show its natural level, then again after existing controls and the additional controls that should be added.

Objectives, assets and stakeholders

The objective is to produce accurate and timely financial reports, protect cash and records, meet filing and audit duties, and keep the confidence of owners, lenders and regulators. The assets in scope are cash and bank accounts, ledgers and supporting records, customer and supplier data, the finance system and the reputation of the finance team. Stakeholders include finance staff, management and the board, the external auditor, lenders, suppliers, customers and tax and corporate authorities. Every risk has one owner role, and the chief financial officer keeps the register current and reports to the audit committee each quarter.

Risk matrix: before and after controls

Each cell shows hazard numbers placed by likelihood and impact. Compare the two grids to see how controls move each hazard.

Before controls

Inherent risk

Risk before controls: rows are likelihood from almost certain to rare, columns are impact from insignificant to catastrophic. Cells list hazard numbers.
1
Insignificant		 2
Minor		 3
Moderate		 4
Major		 5
Catastrophic
5 Almost certain
4 Likely Likelihood 4, impact 4, score 16, high: H01 H05 Likelihood 4, impact 5, score 20, critical: H03
3 Possible Likelihood 3, impact 3, score 9, medium: H08 Likelihood 3, impact 4, score 12, high: H04 H07 Likelihood 3, impact 5, score 15, high: H02
2 Unlikely Likelihood 2, impact 4, score 8, medium: H06
1 Rare

After controls

Residual risk

Risk after controls: rows are likelihood from almost certain to rare, columns are impact from insignificant to catastrophic. Cells list hazard numbers.
1
Insignificant		 2
Minor		 3
Moderate		 4
Major		 5
Catastrophic
5 Almost certain
4 Likely
3 Possible Likelihood 3, impact 2, score 6, medium: H07 Likelihood 3, impact 3, score 9, medium: H05
2 Unlikely Likelihood 2, impact 2, score 4, low: H08 Likelihood 2, impact 3, score 6, medium: H01 H02 H04 Likelihood 2, impact 4, score 8, medium: H03
1 Rare Likelihood 1, impact 3, score 3, low: H06
  • Low 1 to 4
  • Medium 5 to 9
  • High 10 to 16
  • Critical 17 to 25

Hazard register

A summary first, then the detail for each hazard.

Summary of hazards with scores before and after controls
No.HazardBeforeAfterOwner
H01 Misstatement from transaction and reconciliation errors 16 High 6 Medium Financial controller
H02 Weak access control and segregation of duties 15 High 6 Medium Head of finance
H03 Fraud and misappropriation of funds 20 Critical 8 Medium Internal audit lead
H04 Tax, reporting and governance failures 12 High 6 Medium Company secretary
H05 Data quality and cyber exposure 16 High 9 Medium IT manager
H06 Conflicts of interest and professional conduct 8 Medium 3 Low Compliance officer
H07 Credit, liquidity and counterparty exposure 12 High 6 Medium Treasury lead
H08 Valuation and forecasting uncertainty 9 Medium 4 Low Financial controller
H01

Misstatement from transaction and reconciliation errors

Financial Before 16 After 6

Entries are posted to the wrong account or period, and bank, ledger and sub-ledger balances are not reconciled on time, so the financial statements carry errors.

Who or what is affected: Finance team, board and users of the accounts

Causes

Manual entry, heavy month-end workload and reconciliations that depend on one person.

Consequences

Wrong statements, restated figures, delayed reporting and loss of confidence from the board and auditor.

Existing controls

  • Bank accounts are reconciled to the ledger each month.
  • A second person reviews journal entries above a set value.

Control gaps

Review of small entries is skipped, and unreconciled items can sit for months without escalation.

Additional controls

  • Prevent: Use a month-end close checklist with dated sign-off for every reconciliation.
  • Detect: Run exception reports for unusual entries, late postings and unreconciled items.
Likelihood 4 x impact 4 before; 2 x 3 after Owner: Financial controller Target: Within 45 days Early warning: Reconciling items older than 30 days on any account.
H02

Weak access control and segregation of duties

Operational Before 15 After 6

One person can create a supplier, approve an invoice and release payment, or holds wider system access than the role needs, so errors and misuse go unseen.

Who or what is affected: Finance team, owners and suppliers

Causes

Small teams, shared passwords and access rights that are added but never removed.

Consequences

Undetected error or misuse, loss of funds and audit findings on control design.

Existing controls

  • Users sign in with individual accounts.
  • Payments above a set limit need a second approval.

Control gaps

Access rights are reviewed only when someone changes role or leaves the organization.

Additional controls

  • Prevent: Map roles to permissions and remove any combination that lets one person start and approve a payment.
  • Detect: Review user access and approval logs each quarter and record the outcome.
Likelihood 3 x impact 5 before; 2 x 3 after Owner: Head of finance Target: Within 60 days Early warning: A user who holds both entry and approval rights for payments.
H03

Fraud and misappropriation of funds

Financial Before 20 After 8

Fake suppliers, altered bank details, inflated expenses or diverted receipts take money from the organization, often over a long period and in small amounts.

Who or what is affected: Owners, lenders, employees and customers

Causes

Trust placed in one person, pressure to meet targets and weak checks on supplier changes.

Consequences

Direct loss, legal action, damage to reputation and a breakdown in trust.

Existing controls

  • Supplier bank detail changes are confirmed by phone.
  • Expense claims need a line manager approval before payment.

Control gaps

Matching is done on a sample only, so small repeated payments can pass unnoticed.

Additional controls

  • Prevent: Verify new suppliers and bank detail changes through a call to a known contact before any payment.
  • Respond: Freeze suspect payments, preserve records and notify the audit committee at once.
Likelihood 4 x impact 5 before; 2 x 4 after Owner: Internal audit lead Target: Within 45 days Early warning: A supplier bank detail change that is not confirmed by a call back.
H04

Tax, reporting and governance failures

Legal and compliance Before 12 After 6

Filing deadlines, disclosure rules or tax treatments are missed or misapplied, and the board does not receive the information it needs to oversee the accounts.

Who or what is affected: Management, board and regulators

Causes

Rules that differ by country and change, a small team and filings prepared at the last minute.

Consequences

Penalties, interest, restated accounts and loss of trust with regulators and lenders.

Existing controls

  • A calendar lists the main filing and tax payment dates.
  • Management accounts are shared with the board each quarter.

Control gaps

Jurisdiction is assumed and no one confirms current rules before a filing is made.

Additional controls

  • Prevent: Keep a compliance calendar with an owner and backup owner for every duty, checked each month.
  • Detect: Ask a qualified reviewer to test a sample of filings against the rules that apply.
Likelihood 3 x impact 4 before; 2 x 3 after Owner: Company secretary Target: Within 30 days Early warning: A filing due within 10 days with no preparer or reviewer named.
H05

Data quality and cyber exposure

Technology and data Before 16 After 9

Weak passwords, phishing and unprotected spreadsheets expose financial records, while poor master data and manual transfers between systems create errors in reports.

Who or what is affected: Finance team, customers and suppliers

Causes

Phishing, reused passwords and spreadsheets copied between people and systems.

Consequences

Stolen data, false payments, report errors and a regulator notice.

Existing controls

  • The finance system needs a password and is backed up daily.
  • Staff are told not to share finance files through public links.

Control gaps

Spreadsheets used for key figures sit outside the access controls and are not version checked.

Additional controls

  • Prevent: Enable multi-factor sign in and train staff to spot payment request scams each year.
  • Recover: Test restoring the ledger from backup and keep a written recovery plan.
Likelihood 4 x impact 4 before; 3 x 3 after Owner: IT manager Target: Within 30 days Early warning: Repeated payment request scams reported to a finance mailbox.
H06

Conflicts of interest and professional conduct

Reputational Before 8 After 3

A preparer, approver or auditor has a personal or business link to a party being reviewed, or feels pressure to soften findings, which weakens independence and trust in the numbers.

Who or what is affected: Auditors, management and the public

Causes

Long relationships with suppliers or clients, fee pressure and unclear rules on gifts.

Consequences

Loss of independence, disciplinary action and damage to professional standing.

Existing controls

  • A code of conduct is signed each year.
  • Staff declare outside interests when they join the organization.

Control gaps

Declarations are collected but never compared against current engagements and contracts.

Additional controls

  • Prevent: Require a written independence check before each engagement and an annual conflicts declaration.
  • Respond: Provide a confidential route to raise concerns and record how each one was handled.
Likelihood 2 x impact 4 before; 1 x 3 after Owner: Compliance officer Target: Within 60 days Early warning: A declared interest linked to an open contract or engagement.
H07

Credit, liquidity and counterparty exposure

Financial Before 12 After 6

Customers pay late or fail, a lender withdraws support or a key supplier fails, and the organization cannot meet its payments when they fall due.

Who or what is affected: Owners, lenders and employees

Causes

Concentration in a few customers, long payment terms and forecasts that are rarely updated.

Consequences

Cash shortage, missed payments, higher borrowing cost and loss of supplier trust.

Existing controls

  • Cash is reviewed weekly by the treasury lead.
  • Customer credit terms are agreed in writing before trading.

Control gaps

The forecast is checked against actual cash only once a quarter, which is too slow to act on.

Additional controls

  • Prevent: Set credit limits and a collection routine, and update a rolling cash forecast each week.
  • Respond: Agree a standby funding plan and a contact order for a cash shortfall.
Likelihood 3 x impact 4 before; 3 x 2 after Owner: Treasury lead Target: Within 60 days Early warning: Customer invoices overdue by more than 60 days.
H08

Valuation and forecasting uncertainty

Strategic Before 9 After 4

Estimates for stock, receivables, assets and future income rest on assumptions that may be optimistic, so balances and decisions are wrong when conditions change.

Who or what is affected: Management, investors and auditors

Causes

Reliance on one source, pressure for good results and assumptions that are not revisited.

Consequences

Overstated assets or profit, poor decisions and later write-downs.

Existing controls

  • Estimates are reviewed by the finance lead at period end.
  • Major assumptions are written in the working papers.

Control gaps

Past estimates are not compared with outcomes, so bias goes unseen.

Additional controls

  • Prevent: Document each key assumption with its evidence and test a low and a high case.
  • Detect: Compare past estimates with actual results and report the differences to the audit committee.
Likelihood 3 x impact 3 before; 2 x 2 after Owner: Financial controller Target: Within 90 days Early warning: An adjustment above the usual level for the same balance.

Rating method and evaluation

Each risk is rated on two five-point scales. Likelihood runs from Rare to Almost certain, and impact runs from Insignificant to Severe. Multiplying the two gives a score from 1 to 25, which falls into one of four bands: Low from 1 to 4, Medium from 5 to 9, High from 10 to 16 and Critical from 17 to 25. The score guides the order of work and is not a precise measurement. Inherent risk is the score before any controls. Residual risk is the score after the existing and additional controls. Impact is judged on money lost, time to correct, effect on reported results and harm to trust, and a financial or compliance risk is never rated down only because it has not yet happened. Critical risks need immediate senior attention and a dated plan, High risks need a named owner and a funded plan, Medium risks need routine controls with monitoring, and Low risks are accepted and watched. Owners and the internal audit lead should challenge every rating, and any rating is reviewed whenever an indicator reaches its escalation threshold.

Likelihood, impact and rating bands

Likelihood

  • 5 Almost certain: Expected to happen in most circumstances.
  • 4 Likely: Will probably happen in many circumstances.
  • 3 Possible: Could happen at some time.
  • 2 Unlikely: Not expected, but it could happen.
  • 1 Rare: Only in exceptional circumstances.

Impact

  • 1 Insignificant: No lasting effect. Handled within routine work.
  • 2 Minor: Small effect that is quickly corrected.
  • 3 Moderate: Noticeable effect that needs managed effort to correct.
  • 4 Major: Serious effect on people, delivery or reputation.
  • 5 Catastrophic: Severe or lasting effect that threatens the whole activity.

Bands (likelihood x impact)

  • Low (1 to 4): Accept and monitor.
  • Medium (5 to 9): Manage with routine controls.
  • High (10 to 16): Senior attention and a treatment plan.
  • Critical (17 to 25): Act first. Do not proceed until reduced.

Monitoring, escalation and review

Review this assessment every 6 months, and sooner when an indicator below reaches its threshold.

Early-warning indicators and escalation thresholds
Indicator to watchEscalate when
Reconciling items older than 30 days on any account.Escalate to the financial controller when any item is older than 30 days, and to the chief financial officer after 60 days.
Payment changes made without a call back to a known contact.Escalate to the internal audit lead at once, and hold the payment until it is confirmed.
Users who hold both entry and approval rights for payments.Escalate to the head of finance when any such user is found, and remove one right within a week.
Customer invoices overdue by more than 60 days and cash cover below the agreed floor.Escalate to the treasury lead when cover falls below the floor, and to the audit committee if it stays low for a month.
Filings due within 10 days with no named preparer or reviewer.Escalate to the company secretary at once, and to the chief financial officer if still open after 3 days.

Contingency arrangements

If a serious event occurs, such as confirmed fraud, a data breach or a filing that cannot be made on time, the financial controller stops related payments, preserves records and informs the chief financial officer and the audit committee. The IT manager isolates affected accounts and restores data from the latest tested backup. Legal, audit and regulator contacts are made through the company secretary as the relevant jurisdiction requires. Cash is protected by a standby funding plan, and staff, lenders and customers are told what they need to know early and plainly.

Prioritized action plan

  1. Introduce a dated month-end close checklist with sign-off, owner financial controller, within 45 days.
  2. Split entry and approval of payments and review user access, owner head of finance, within 60 days.
  3. Confirm supplier bank changes by call back and review duplicate payments, owner internal audit lead, within 45 days.
  4. Enable multi-factor sign in and test a restore from backup, owner IT manager, within 30 days.
  5. Set up a compliance calendar with a backup owner for each filing, owner company secretary, within 30 days.

Conclusion

Reliable financial reporting depends on a few steady habits: dated reconciliations, split duties, checks on every change to payment details, tested backups and a calendar for each filing. The highest inherent scores sit with fraud, posting errors and cyber exposure, and each has actions that bring the residual score down. Treat the register as a living record, review it on the stated cycle, and seek qualified advice for any real accounting, audit, tax, treasury or legal question.

Assumptions and limitations

Assumptions

  • The organization reports under one recognized accounting framework and is audited each year by an independent firm.
  • Staff use a managed finance system with individual user accounts and a central set of approval limits.
  • Jurisdiction and sector are not specified, so legal and tax duties are described in general terms only.

Limitations

  • The scores are examples for learning and do not describe any real organization or audit.
  • Tax, accounting and financial regulation differ by country and change over time, so specialist review is needed.
  • This is educational content and is not financial, tax, legal or investment advice.

Related frameworks to study

  • Internal control framework with control activities and monitoring
  • Enterprise risk management framework with a stated risk appetite
  • Three lines model of risk ownership
  • Hierarchy of controls

Finance Risk Assessment

China, India, United States, Indonesia, Pakistan, Nigeria, Brazil, Bangladesh, Russia, Japan, Mexico, Philippines, Vietnam, Egypt, Turkey, Germany, United Kingdom, France, Italy, Canada, South Korea, Australia, Spain.

For Learning Reference Only: This assessment demonstrates how risk assessment principles are applied in a practical setting, providing a useful reference for learning and understanding. Actual assessments may be adapted to suit specific site conditions and circumstances.

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