Question

A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the expected magnitude of the loss. This is called

Answer 1

Answer:

Risk.

Explanation:

A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the expected magnitude of the loss. Thus, this is called risk.

Risk management can be defined as the process of identifying, evaluating, analyzing and controlling potential threats or risks present in a business as an obstacle to its capital, revenues and profits. This ultimately implies that, risk management involves prioritizing course of action or potential threats in order to mitigate the risk that are likely to arise from such business decisions.

An effective and efficient way to mitigate risk in business is through the use of internal controls.

Hence, internal controls if properly executed helps to increase operational efficiency, protect and safeguard assets, provides accurate financial information, prevents fraudulent or unlawful behaviors, timeliness of financial records and reporting.