Managers put assets at risk to achieve objectives. This relationship is a fundamental planning problem for managers. Managers must plan, organize, direct, and control the optimum mix of assets to achieve their objectives given the risks that are present. It is not enough to assemble the right stuff to do the job, managers also must consider how risks will affect the assets. The assets can include human resources, intellectual property, intangible good will, as well as the more usual financial and physical assets.
Structured planning is an effective internal control system.
Through planning, managers anticipate the inherent risks in their activities and set up methods to mitigate the effects of these risks. Inherent risks, also known as business risks, exist in all activities. The inherent risk of any activity is a function of the mix of assets and the nature of the activity. For example, a cash teller operation has a degree of business risk within the activity. The biggest inherent risk in a cash teller operation is the loss of the cash asset.