What is a Risk Assessment?

Risk Assessment is the new buzz word for bank examiners and it has been keeping me busy this week. Being a CPA and former auditor, I was familiar with the concept of a risk assessment, but not to the extent currently being called for in banking. Essentially, a risk assessment is a rating of the hazard or peril in a certain area or type of transaction within a business. Every regulation and area in the bank needs a 'risk rating'. This rating is usually hashed out in a meeting of knowledgeable people in the bank. The ratings are usually Low, Medium or High. Areas in a bank that need a risk assessed, for example, are loans and deposits. How much hazard or peril is inherent in a bank's Loan Department? Each bank will be different based on their size, location, and personnel. It looks like I will be busy for quite a while assessing the risk in all of the different areas of our bank.