RSK: Risks

Document Type

Code: RSK
Name: Risks
Domain: Risk & Governance

Abstract

This specification defines the Risks document type within the BSpec 1.0 Universal Business Specification Standard. It establishes normative requirements, structured templates, and implementation guidance for organizations documenting risks within the risk-governance domain. This specification enables systematic, machine-readable documentation that supports strategic planning, operational execution, and organizational alignment.

Purpose and Scope

The Risks document defines systematic approaches to identifying, assessing, and managing business risks that could impact organizational objectives, operations, and stakeholder value. It establishes risk management frameworks that enable proactive risk mitigation, informed decision making, and resilient business operations.

Document Metadata Schema

---
id: RSK-{risk-category}
title: "Risks — {Risk Category or Domain}"
type: RSK
status: Draft|Review|Approved|Active|Deprecated
version: 1.0.0
owner: Risk-Team|Chief-Risk-Officer
stakeholders: [risk-team, executives, board, business-units, audit-committee]
domain: risk-governance
priority: Critical|High|Medium|Low
scope: risk-management
horizon: strategic
visibility: confidential

depends_on: [STR-*, OBJ-*, OPS-*, FIN-*]
enables: [CTL-*, COM-*, GOV-*, AUD-*]

risk_category: Strategic|Operational|Financial|Compliance|Technology|Reputational
risk_scope: Enterprise|Business-unit|Process|Project
assessment_methodology: Qualitative|Quantitative|Hybrid
risk_appetite: Conservative|Moderate|Aggressive

success_criteria:
  - "Risk management enables informed decision making and strategic execution"
  - "Risk processes identify and mitigate material threats to business objectives"
  - "Risk framework supports business resilience and stakeholder confidence"
  - "Risk culture promotes proactive risk awareness and management"

assumptions:
  - "Risk identification processes are comprehensive and systematic"
  - "Risk assessment methodologies are appropriate and reliable"
  - "Risk mitigation strategies are effective and implementable"

constraints: [Resource and operational constraints]
standards: [Risk management and governance standards]
review_cycle: quarterly
---

Content Structure Template

# Risks — {Risk Category or Domain}

## Executive Summary
**Purpose:** {Brief description of risk scope and management objectives}
**Risk Category:** {Strategic|Operational|Financial|Compliance|Technology|Reputational}
**Risk Scope:** {Enterprise|Business-unit|Process|Project}
**Assessment Method:** {Qualitative|Quantitative|Hybrid}

## Risk Management Framework

### Risk Philosophy
- **Risk Awareness:** {Culture of risk awareness and proactive management}
- **Risk-Return Balance:** {Balancing risk taking with return objectives}
- **Stakeholder Protection:** {Protecting stakeholder interests and value}
- **Continuous Improvement:** {Evolving risk management capabilities}

### Risk Management Approach
    ```yaml
    risk_methodology:
      risk_identification: {Systematic risk identification processes}
      risk_assessment: {Risk evaluation and prioritization methodology}
      risk_treatment: {Risk response and mitigation strategies}
      risk_monitoring: {Ongoing risk monitoring and reporting}
    
    governance_framework:
      risk_oversight: {Board and management risk oversight}
      risk_appetite: {Risk appetite statement and tolerance levels}
      risk_policies: {Risk management policies and procedures}
    ```

### Risk Categories
- **Strategic Risks:** {Risks affecting strategic objectives and market position}
- **Operational Risks:** {Risks affecting day-to-day business operations}
- **Financial Risks:** {Risks affecting financial performance and stability}
- **Compliance Risks:** {Risks related to regulatory and legal compliance}

## Risk Identification

### Risk Universe
    ```yaml
    risk_universe:
      strategic_risks:
        - risk: {Market Risk}
          description: {Risk of market changes affecting competitive position}
          drivers: [competition, customer_preferences, technology_disruption]
          impact_areas: [revenue, market_share, strategic_objectives]
    
        - risk: {Technology Risk}
          description: {Risk of technology obsolescence or disruption}
          drivers: [innovation, digital_transformation, cybersecurity]
          impact_areas: [operations, competitive_advantage, costs]
    
      operational_risks:
        - risk: {Process Risk}
          description: {Risk of process failures or inefficiencies}
          drivers: [human_error, system_failures, process_gaps]
          impact_areas: [quality, customer_satisfaction, costs]
    
        - risk: {People Risk}
          description: {Risk related to human resources and capabilities}
          drivers: [talent_retention, skills_gaps, succession_planning]
          impact_areas: [productivity, innovation, continuity]
    ```

### Risk Sources
- **Internal Risks:** {Risks originating within the organization}
- **External Risks:** {Risks from external environment and stakeholders}
- **Emerging Risks:** {New and evolving risk factors}
- **Interconnected Risks:** {Risks with dependencies and correlations}

### Risk Identification Methods
    ```yaml
    identification_methods:
      systematic_approaches:
        risk_workshops: {Structured risk identification sessions}
        expert_interviews: {Subject matter expert consultations}
        scenario_analysis: {Scenario-based risk identification}
    
      analytical_approaches:
        historical_analysis: {Analysis of past risk events}
        benchmark_analysis: {Industry and peer risk comparison}
        trend_analysis: {Emerging risk trend analysis}
    
      stakeholder_input:
        employee_feedback: {Employee risk identification input}
        customer_feedback: {Customer-related risk identification}
        supplier_feedback: {Supply chain risk identification}
    ```

## Risk Assessment

### Risk Measurement
    ```yaml
    risk_assessment:
      impact_assessment:
        financial_impact: {Quantitative financial impact estimation}
        operational_impact: {Operational disruption assessment}
        reputational_impact: {Brand and reputation impact evaluation}
        strategic_impact: {Strategic objective achievement impact}
    
      probability_assessment:
        likelihood_scale: [very_low, low, medium, high, very_high]
        probability_factors: [historical_frequency, environmental_factors, control_effectiveness]
        time_horizon: [short_term, medium_term, long_term]
    
      risk_rating:
        risk_matrix: {Impact vs probability risk matrix}
        risk_scoring: {Quantitative risk scoring methodology}
        risk_categorization: [low, medium, high, critical]
    ```

### Quantitative Analysis
- **Value at Risk (VaR):** {Statistical risk measurement techniques}
- **Monte Carlo Simulation:** {Probabilistic risk modeling}
- **Sensitivity Analysis:** {Risk factor sensitivity testing}
- **Stress Testing:** {Extreme scenario risk assessment}

### Qualitative Assessment
    ```yaml
    qualitative_methods:
      expert_judgment:
        risk_panels: {Expert panel risk assessments}
        delphi_method: {Structured expert opinion gathering}
        professional_judgment: {Subject matter expert evaluations}
    
      risk_indicators:
        leading_indicators: {Early warning risk indicators}
        lagging_indicators: {Historical risk performance indicators}
        key_risk_indicators: {Critical risk measurement metrics}
    
      scenario_assessment:
        best_case: {Optimistic scenario risk assessment}
        worst_case: {Pessimistic scenario risk assessment}
        most_likely: {Expected scenario risk assessment}
    ```

## Risk Treatment and Mitigation

### Risk Response Strategies
    ```yaml
    risk_responses:
      risk_avoidance:
        strategy: {Eliminating risk by avoiding activities}
        examples: [business_exit, product_discontinuation, market_withdrawal]
        considerations: [opportunity_cost, strategic_alignment]
    
      risk_mitigation:
        strategy: {Reducing risk likelihood or impact}
        examples: [process_improvement, training, redundancy]
        effectiveness: {Mitigation effectiveness measurement}
    
      risk_transfer:
        strategy: {Transferring risk to third parties}
        examples: [insurance, outsourcing, hedging]
        cost_benefit: {Transfer cost vs risk reduction benefit}
    
      risk_acceptance:
        strategy: {Accepting risk within tolerance levels}
        rationale: {Risk acceptance rationale and approval}
        monitoring: {Accepted risk monitoring procedures}
    ```

### Control Implementation
- **Preventive Controls:** {Controls to prevent risk occurrence}
- **Detective Controls:** {Controls to detect risk events}
- **Corrective Controls:** {Controls to respond to risk events}
- **Compensating Controls:** {Alternative controls when primary controls fail}

### Risk Mitigation Plans
    ```yaml
    mitigation_planning:
      action_plans:
        - risk: {Specific risk being addressed}
          actions: [action1, action2, action3]
          responsibility: {Assigned responsibility for execution}
          timeline: {Implementation timeline and milestones}
          resources: {Required resources and budget}
    
      effectiveness_tracking:
        success_metrics: {Metrics to measure mitigation effectiveness}
        monitoring_frequency: {How often mitigation is monitored}
        review_triggers: {Events triggering mitigation review}
    ```

## Risk Monitoring and Reporting

### Risk Monitoring Framework
    ```yaml
    monitoring_framework:
      key_risk_indicators:
        - indicator: {Risk indicator name}
          metric: {Specific measurement metric}
          threshold: {Risk threshold levels}
          frequency: {Monitoring frequency}
          responsibility: {Monitoring responsibility}
    
      risk_dashboards:
        executive_dashboard: {High-level risk summary for executives}
        operational_dashboard: {Detailed risk metrics for operations}
        board_reporting: {Board-level risk reporting}
    
      escalation_procedures:
        trigger_events: [threshold_breach, incident_occurrence, control_failure]
        escalation_levels: [operational, management, executive, board]
        communication_protocols: {Risk communication procedures}
    ```

### Risk Reporting
- **Regular Reports:** {Periodic risk status and trend reporting}
- **Exception Reports:** {Immediate reporting of significant risk events}
- **Board Reports:** {Board-level risk governance reporting}
- **Regulatory Reports:** {Risk reporting to regulatory authorities}

### Performance Measurement
    ```yaml
    risk_performance:
      effectiveness_metrics:
        - metric: {Risk Mitigation Effectiveness}
          calculation: {Mitigation success rate}
          target: {Target effectiveness level}
    
        - metric: {Risk Event Frequency}
          measurement: {Number of risk events per period}
          trend: {Frequency trend analysis}
    
      efficiency_metrics:
        risk_management_cost: {Cost of risk management activities}
        return_on_risk_investment: {ROI of risk management investments}
        risk_adjusted_performance: {Performance adjusted for risk}
    ```

## Business Continuity and Crisis Management

### Business Continuity Planning
    ```yaml
    business_continuity:
      continuity_framework:
        critical_processes: {Identification of critical business processes}
        recovery_objectives: [RTO, RPO, minimum_service_levels]
        continuity_strategies: [backup_systems, alternate_sites, vendor_agreements]
    
      crisis_management:
        crisis_team: {Crisis management team structure}
        communication_plan: {Stakeholder communication procedures}
        decision_authority: {Crisis decision-making authority}
    
      testing_validation:
        testing_schedule: {Regular continuity plan testing}
        test_scenarios: {Realistic crisis simulation scenarios}
        improvement_process: {Plan improvement based on test results}
    ```

### Incident Response
- **Incident Classification:** {Risk event classification and severity levels}
- **Response Procedures:** {Standardized incident response procedures}
- **Recovery Operations:** {Business recovery and restoration procedures}
- **Lessons Learned:** {Post-incident analysis and improvement}

## Risk Culture and Governance

### Risk Culture Development
    ```yaml
    risk_culture:
      culture_elements:
        risk_awareness: {Organization-wide risk awareness}
        accountability: {Clear risk ownership and accountability}
        transparency: {Open risk communication and reporting}
        learning_orientation: {Learning from risk events and near-misses}
    
      training_programs:
        risk_education: {Risk management training and education}
        skill_development: {Risk assessment and management skills}
        awareness_campaigns: {Risk awareness communication campaigns}
    
      incentive_alignment:
        performance_metrics: {Risk-adjusted performance metrics}
        compensation_alignment: {Risk-aligned compensation structures}
        recognition_programs: {Risk management recognition and rewards}
    ```

### Risk Governance Structure
- **Board Oversight:** {Board risk governance responsibilities}
- **Risk Committee:** {Risk committee structure and authority}
- **Risk Management Function:** {Risk management organizational structure}
- **Three Lines of Defense:** {Risk management defense model}

### Risk Appetite and Tolerance
    ```yaml
    risk_appetite:
      appetite_statement:
        strategic_risks: {Appetite for strategic risks}
        operational_risks: {Tolerance for operational risks}
        financial_risks: {Limits on financial risk exposure}
    
      tolerance_levels:
        quantitative_limits: [var_limits, concentration_limits, leverage_limits]
        qualitative_guidelines: [reputation_protection, compliance_standards]
    
      monitoring_compliance:
        appetite_monitoring: {Regular appetite compliance monitoring}
        breach_procedures: {Procedures for appetite limit breaches}
        review_process: {Periodic appetite review and updating}
    ```

## Technology and Innovation

### Risk Technology
    ```yaml
    risk_technology:
      risk_systems:
        risk_platforms: [governance_risk_compliance_systems, risk_analytics_tools]
        data_integration: {Integration with business systems}
        automation: {Automated risk monitoring and reporting}
    
      analytics_capabilities:
        predictive_analytics: {Predictive risk modeling}
        machine_learning: {ML for risk pattern recognition}
        scenario_modeling: {Advanced scenario analysis}
    
      digital_innovation:
        artificial_intelligence: {AI for risk management}
        blockchain: {Distributed ledger for risk transparency}
        internet_of_things: {IoT for real-time risk monitoring}
    ```

### Emerging Risk Management
- **Technology Risks:** {Cybersecurity, data privacy, AI risks}
- **Climate Risks:** {Physical and transition climate risks}
- **Regulatory Risks:** {Evolving regulatory landscape risks}
- **Social Risks:** {ESG and social responsibility risks}

## Validation
*Evidence that risk management enables informed decisions, mitigates material threats, and supports business resilience*

## Quality Standards

### Bronze Level (Minimum Viable)
- [ ] Basic risk register with identification and assessment
- [ ] Simple risk monitoring and reporting
- [ ] Basic risk mitigation and control processes
- [ ] All required metadata fields completed

### Silver Level (Investment Ready)
- [ ] Comprehensive risk framework with systematic processes
- [ ] Structured risk assessment with quantitative and qualitative methods
- [ ] Effective risk mitigation with performance monitoring
- [ ] Regular risk reporting and governance oversight

### Gold Level (Operational Excellence)
- [ ] Advanced risk analytics with predictive capabilities
- [ ] Sophisticated risk integration with business planning
- [ ] Comprehensive business continuity and crisis management
- [ ] Strategic risk culture with continuous improvement

## Common Pitfalls

1. **Risk identification gaps**: Incomplete or superficial risk identification processes
2. **Poor risk assessment**: Inaccurate or inconsistent risk measurement and evaluation
3. **Ineffective mitigation**: Risk responses that don't adequately address identified risks
4. **Weak monitoring**: Inadequate risk monitoring and early warning systems

## Success Patterns

1. **Comprehensive risk integration**: Risk management fully integrated with strategic planning and business operations
2. **Proactive risk culture**: Strong risk awareness culture with proactive identification and management
3. **Data-driven decisions**: Risk-informed decision making with robust analytics and insights
4. **Continuous improvement**: Regular enhancement of risk management capabilities and effectiveness

## Relationship Guidelines

### Typical Dependencies
- **STR (Strategy)**: Strategic objectives drive risk identification and appetite setting
- **OBJ (Objectives)**: Business objectives drive risk tolerance and mitigation priorities
- **OPS (Operations)**: Operational processes drive operational risk identification and management
- **FIN (Financial Model)**: Financial projections drive financial risk assessment and limits

### Typical Enablements
- **CTL (Controls)**: Risk assessment drives control design and implementation
- **COM (Compliance)**: Risk management enables compliance monitoring and assurance
- **GOV (Governance)**: Risk framework enables governance oversight and decision making
- **AUD (Audit)**: Risk assessment drives audit planning and scope

## Document Relationships

This document type commonly relates to:

- **Depends on**: STR (Strategy), OBJ (Objectives), OPS (Operations), FIN (Financial Model)
- **Enables**: CTL (Controls), COM (Compliance), GOV (Governance), AUD (Audit)
- **Informs**: Strategic planning, business operations, investment decisions
- **Guides**: Control design, compliance programs, audit planning

## Validation Checklist

- [ ] Executive summary with clear purpose, risk category, scope, and assessment method
- [ ] Risk management framework with philosophy, approach, and categories
- [ ] Risk identification with risk universe, sources, and identification methods
- [ ] Risk assessment with measurement, quantitative analysis, and qualitative assessment
- [ ] Risk treatment with response strategies, control implementation, and mitigation plans
- [ ] Risk monitoring with framework, reporting, and performance measurement
- [ ] Business continuity with planning, incident response, and crisis management
- [ ] Risk culture with development, governance structure, and appetite definition
- [ ] Technology and innovation with risk technology, analytics, and emerging risk management
- [ ] Validation evidence of informed decision enabling, threat mitigation, and resilience support

---

## Related Documents

- [Back to Document Types](/docs/document-types)
- [Domain: Risk & Governance](/docs/domains/risk-governance)
- [Full Specification](/spec/v1-0-0)