Risk Identification Process: Identifying The Root Cause

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Risk Identification Definition

Risk identification can be defined as the process of determining which risks are relevant to an organization.

Risk Identification Process

You can begin to identify risks in many different ways, but the best way to begin the risk identification process is by taking a “root cause” approach. Simply put, root cause is the fundamental reason that an event occurs. Understanding the cause, not just the symptoms, allows you to target mitigation activities in a way that neutralizes risks and prevents them from re-emerging in the future.

Standardization is key in the risk identification process, and having a risk library allows different business units to communicate in a uniform fashion to facilitate risk identification and prioritization of the most critical risks.

Risk Identification Techniques & Methods

When multiple business areas identify the same issue, systemic risks as well as upstream and downstream dependencies can easily be identified and mitigated. The root cause risk identification method also identifies areas that would benefit from centralized controls, which eliminates the extra work of maintaining separate activity-level controls.

What Is Root Cause?

Centralized controls are extremely important from an efficiency standpoint; the more you can accomplish with a set number of controls (rather than designing a larger number of unique controls), the fewer tests and metrics you’ll need to run and collect, respectively. Risk identification of the root cause of a risk provides information about what triggers a loss and where an organization is vulnerable. Using root source categories provides meaningful feedback:

What steps should be taken to most effectively mitigate risk in a GRC program? Risk identification based simply on the effect or outcome often leads to ineffective risk mitigation activities.

Risk mitigation activities should be aimed at root cause and will differ depending on the source of risk. For example, in order to prevent a headache, you must know why you have one; if illness is the cause, seeing a doctor is the appropriate mitigation activity. However, if the headaches are caused by a lack of sleep, you should try going to bed earlier instead of seeing a doctor. One way to mitigate a headache is by taking a painkiller. The painkiller will make the headache go away, but it will not prevent future headaches or target the root of the problem.

Armed with the knowledge of the source of a risk, we can proactively manage risk and avoid future risk events. In this simple example, it’s easy to see why creating control based on risk event/outcome (not root cause) can lead to ineffective mitigation activities.


LogicManager provides organizations with a pre-built root cause risk library in our comprehensive risk assessment software. This library is entirely flexible, allowing organizations to use the risk identification techniques or risk identification methods best suited to their organization.

LogicManager’s complete root cause library also includes best practice compliance and performance-balanced scorecard indicators. You can add to your library over time, receiving updates on emerging risks or new standards. To learn more about our risk library, including our identification and assessment tools, click here.

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