The risk management environment encompasses the policies, procedures, tools and activities used by an institution to identify, assess, monitor and mitigate operational risks across all its operations. It is an ongoing process designed to protect the institution from losses due to internal failures, external events, or legal risks.

Key components include:

• Risk Identification and Assessment: Understanding inherent and potential risks in new and existing activities, processes and systems.
• Monitoring and Reporting: Establishing mechanisms to track key risk indicators (KRIs), performance metrics and limit breaches while providing timely reports to senior management and the board.
• Control and Mitigation: Implementing internal controls such as segregation of duties, access restrictions and process checks to reduce risk exposure.