Lesson08-ERM - RISK MANAGEMENT Contents CMA Canada...

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Unformatted text preview: RISK MANAGEMENT Contents CMA Canada Management Accounting Guideline – Identifying, Measuring and Managing Organizational Risks for Improved Performance M A N A G E M E N T S T R A T E G Y M E A S U R E M E N T Identifying, Measuring, and Managing Organizational Risks for Improved Performance By Marc J. Epstein and Adriana Rejc Published by: MANAGEMENT ACCOUNTING GUIDELINE INTRODUCTION The world has changed significantly in the last five years.New and greater pressures and risks have dominated both the international and business news, dramatically altering the issues that corporate managers must address.The attacks of September11,2001,made business executives aware that they must take action to prevent acts of terrorism as well as to prepare for their occurrence at the corporate site and in the wider community.The collapse of notable companies such as Enron and WorldCom highlighted the risk of financial fraud, raised new concerns about corporate governance and internal control,and resulted in the Sarbanes-Oxley Act of 2002 (also referred to as SOX).For multinational organizations,because of globalization and the rapid development of international communications through the Internet,corporate activities related to environmental degradation,child labor, or other social issues in a developing country have been able to impact profits significantly and quickly in the home country.In addition,the risks associated with Information Technology (IT) installations,mergers,human resource policies,and other daily organizational activities have escalated. IDENTIFYING, MEASURING, AND MANAGING ORGANIZATIONAL RISKS FOR IMPROVED PERFORMANCE CONTENTS EXECUTIVE SUMMARY Risk is an inescapable element of competing in a market economy. Organizations must be able to evaluate many types of risk — political,social, environmental,technological,economic, competitive,and financial — and incorporate the results into decisions regarding investments and operations,as well as into the systems used to monitor and evaluate the effectiveness of the actions taken. This guideline provides a Risk Management Payoff Model that includes a selection of performance measures to properly identify,measure,manage,and report risks. The model demonstrates that improved risk measurement and management not only helps the organization prevent loss, achieve performance and profitability targets,and increase shareholder value,but also produces organization-wide benefits, such as allocation of resources to the risks that really matter,enhanced working conditions,and sustained or improved corporate reputation. INTRODUCTION 5 DRIVERS OF INCREASED RISK AWARENESS 6 INCREASED RESPONSIBILITIES IN RISK MANAGEMENT 8 APPROACHES TO RISK MANAGEMENT 8 THE PROCESS OF RISK MANAGEMENT 9 RISK MANAGEMENT FOR SPECIFIC BUSINESS FUNCTIONS 31 INFORMATION RISK 33 RISK ASSESSMENT IN DUE DILIGENCE 34 COMPREHENSIVE RISK MANAGEMENT 34 THE ROLE OF SENIOR FINANCIAL MANAGERS 35 CONCLUSION 36 BIBLIOGRAPHY 37 APPENDIX:REGULATORY...
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Lesson08-ERM - RISK MANAGEMENT Contents CMA Canada...

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