The firms and organization around the world have a set of basic rules that are used in assigning the risk in accordance to its entity. They are usually based on the type of customer, kind of business, geography, and appropriateness of the business to the customers. These entities required a set of security and approved regulation to guide in order to ensure effective running of the organization. Risk entities are categorized into low and higher risks to ensure effective practical measures are applied in tackling them. Higher risk requires long-term investigative measures compared to low-risks. They are conducted by more seasoned analysts and the measures applied depend on the outcome of the analysis, (Răşinar). The degree in which an organization applies the best practice to risk factors depends on internal and external communication, the size of business run by the organization, and the level of the process employed in addressing the risk factors. Vallabh, G states that formal communication within the organization helps to address critical information that may derail the effectiveness of the organization. Communication helps in understanding geographical, volume and size of the risk factor and appropriate measures are applied. The risk-based approach involves the deployment of common sense such as observation of a strong correlation between the level of due diligence, and the size of the loans applied for in banks helps to combat money laundering and reduction of credit risks. Additionally, Stewart, Fiona emphases on the need for government agencies or authorities, banks, and private sectors to understand the level of risk factors and address them in accordance with the level of the risk entity. These can be attained by the adoption of best practices and mechanism through which risk factors are tackled to enhance the effectiveness of the organization.
