Which aspect of risk management directly helps in minimizing the potential of losses?

Control activities are specific actions and policies implemented to mitigate identified risks and ensure that potential losses are minimized. These activities can include administrative procedures, specific physical measures, and checks and balances that monitor daily operations to ensure compliance with standards and regulations. By establishing control activities, businesses can effectively limit exposure to risks related to financial loss, regulatory issues, or operational inefficiencies.

For example, in the cannabis industry, control activities might involve proper inventory management systems to reduce the risk of theft or loss, or implementing stringent quality control measures to prevent product recalls. The proactive nature of these activities is what fundamentally aids in reducing the likelihood or impact of negative events on an organization. Consequently, effective control activities are integral to an organization’s overall risk management process, as they directly address and aim to mitigate the factors that could lead to losses.