Internal Midterm Review .docx - ACCT3005 Unit 2 1.1 Define...

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ACCT3005 Unit 2 1.1 Define risk and enterprise risk management. Risk: Uncertainty of an event occurring that could have an impact on the achievement of objectives. Measured in terms of likelihood and consequences. (Impact, Significance) COSO ERM Elements (Face) Explanation Internal Environment Risk management philosophy Risk appetite B of D (Board of Directors) attitudes Integrity & ethical values Commitment to competence Organizational structure Assignment of authority and responsibility Human resource standards Objective Setting Aligned with mission Covering all activities Defining risk tolerance Event Identification External economic events Natural environmental events Political events Social factors Internal infrastructure events Internal process-related events External or internal technological events Risk Assessment Consider inherent Consider likelihood and impact Consider qualitative and quantitative elements of the range of possibilities Rank events using probabilities or ranking factors translated from low, medium, high Risk Response Identify possible responses Consider cost vs benefit Control Activities Policies and procedures Approvals authorizations, verifications, reconciliations, reviews, security, segregation of duties Information and Communication IT Reports produced Interdependencies of parts Board of Directors 1
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ACCT3005 Unit 2 Other stakeholders All directions Timely Monitoring Ongoing Presence & functioning Quality Responsibility of management Activities Routine reporting Alert reporting Status reporting Risk-related information COSO ERM Elements (Top) Explanation Strategic High level goals and mission aligned Operations At the unit level Effective and efficient use of resources Reporting Reliability of reporting internally and externally Compliance With laws and regulations COSO ERM Elements (Side) Explanation Entity Level Division Business Unit Subsidiary 1.2 Compare the roles and responsibilities each group in an organization has regarding risk management and internal control. Risk Management Roles: Board of Directors: Oversee management, hold it to account. Review and approve corporate vision, mission, code of ethics (tone at top) Review, provide input, monitor strategy Oversee processes management has to identify risk and opportunity Consider risk tolerance (type and level) Ensure control systems in place and functioning 2
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ACCT3005 Unit 2 Senior Management: Establish risk framework Access risks Treat risks (action plan) Monitor framework Other Employees: Facilitate communication Break down silos Allow constant communication Allow managers to use committee to present views Internal Control Roles: Chief Risk Officer: Function: Integrate RM activities across organization with objectivity Champion ERM Skills Understand business and risk Leadership
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