Demystifying the Art of Risk Management

by Protiviti, 01 October 2010

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topics:
Risk Management

tags:
culture infrastructure integration process Protiviti risk management

Infrastructure

Given the nature of the organisation’s risk management process, the core management activities with which that process is integrated, and the strengths and weaknesses of the organisation’s culture, we can now ask: Is the organisation’s existing infrastructure sufficient to get the job done?

By infrastructure, we mean the company’s policies, internal activities, organisation, reporting and systems related to managing risk. If the answer is ‘yes,’ then we move on. If the answer is ‘no,’ the next question becomes: What changes are needed?

Changes could include any combination of things, such as a risk management policy, more explicit dialogue around risk appetite, a risk management committee, a chief risk officer, improved risk reporting, and more reliable systems.

These elements define what executives should be looking at when evaluating the role and effectiveness of risk management within the organisation, and provide a context for directors when focusing their risk oversight.

Questions to Ask

The following are some suggested questions to ask about the nature of your company’s risks that are inherent in its operations.

Is there a risk management process that provides a framework for managing risk company-wide? Does it address risks inherent in the company’s strategy?

Is risk management primarily focused on insurable, financial and operational risks? Does it make sense to integrate risk management with one or more core management processes, such as strategy-setting?

Are risk management activities scattered across the company operating as separate silos? If so, would coordination across, and even consolidation of, these silos improve risk management?

Are there cultural issues in the organisation that could compromise the effectiveness of risk management?

Is the infrastructure in place sufficient to accomplish the objectives that management and the board wish to achieve with respect to risk management?

About the Author

Protiviti is a global business consulting and internal audit firm composed of experts specialising in risk advisory and transaction services. It provides perspectives on a wide range of critical business issues for clients in the Americas, Asia Pacific, Europe and the Middle East.

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