Establishing ethical values is often difficult because of the need to consider the concerns of different stakeholders. Top management's values must balance the concerns of the company, its employees, suppliers, customers, competitors and the public.
Balancing these can be a complex and frustrating endeavor because interests are often conflicting; in fact, the existence of a written code of conduct does not ensure that it is being followed; compliance with ethical standards, whether or not they are included in this code, is best ensured by the actions and examples of top management. People imitate their leaders; employees like to develop the same attitudes about right and wrong and internal control as top management does.
Risk assessment refers to the identification and analysis of risks relevant to the achievement of objectives, forming a basis for determining how risks should be managed, hence, the entity must be aware of them and face them, must set objectives, integrated with the sales department, production, marketing, finance, other activities and, mainly the accounting aspects that directly influence the development of its activities, so that it operates in concert.
It must also establish mechanisms to identify, analyze and manage the related risks. The author goes on to state that the entity's managers shall identify the risks that may affect the achievement of the institutional objectives due to internal or external factors, and shall take the pertinent measures to successfully face such risks.
Undoubtedly, risks affect the entity's ability to survive; fortunately they compete within their industry; maintain their financial strength, positive public image and maintain the overall quality of their products, services and people. The definition of objectives is a precondition for risk assessment, first the objectives must be defined so that management can identify the risks and take the necessary actions to manage them.