What is the risk-based decision approach?
The process of decision-making involves defining the issues, examining the options and implementing the decision. A risk-based decision-making approach includes identifying the inherent risk that the business is exposed to due to various factors and defining the extent of financial crime risk that the business is ready to bear as determined by the management. Businesses make further decisions, such as onboarding high-risk customers or deploying adequate controls and implementing the necessary risk mitigation measures and controls to reduce inherent risks so that the residual risk is within the risk appetite.
If you would like to read more about the Risk-Based Approach, check out this illustration