Which component reflects a proactive approach to identifying fraud risks within an organization?

The proactive approach to identifying fraud risks within an organization is best represented by conducting fraud risk assessment procedures. This process involves systematically analyzing the potential risks associated with fraud in various areas of the organization, including evaluating processes, controls, and the environment in which the organization operates.

Fraud risk assessments allow organizations to identify vulnerabilities and potential points of fraud before they can be exploited, enabling them to implement specific measures to mitigate those risks. This foresight not only helps in preventing fraud from occurring but also in enhancing overall organizational awareness regarding potential internal and external threats. By proactively assessing these risks, organizations can create a robust framework for fraud prevention.

Monitoring employee morale, while important for organizational health, primarily addresses overall workplace satisfaction and may not directly identify specific fraud risks. Limiting access to financial records can be a reaction to fraud risks rather than a proactive identification method. Similarly, entering contracts with external vendors does not inherently involve assessing fraud risks unless specific measures are taken to vet these vendors for reliability and integrity.