MONASHBUSINESSSCHOOL26The Aim of Establishing the Risk Context▪The aim of the ‘establish the context’ step is to articulate the organisation’s objectives, define the external and internal factors that could be a source of uncertainty, scope and structure the risk management activity, and finally design the criteria to subsequently assess the risk.▪It is therefore a necessary first step in the risk management process. ▪It has its own five-step process to be followed.
MONASHBUSINESSSCHOOL27The Process for Establishing the Risk Context (a Process in the Process)By establishing the context, the organisation articulates its objectives, defines the external and internal parameters to be taken into account when managing risk, and sets the scope andrisk criteria for the remaining process.By establishing the context, the organisation articulates its objectives, defines the external and internal parameters to be taken into account when managing risk, and sets the scope andrisk criteria for the remaining process.Reading: SA/SNZ HB 436:2013. Pages 50-65
MONASHBUSINESSSCHOOL28How do you find the organisation’s objectives?▪In order to assess risks, objectives need to be expressed clearly and unambiguously at the beginning of the risk process.▪Research public information. What goals and targets does the organisation hold itself accountable to?–Annual reports–Other shareholder information including corporate responsibility/sustainability reporting and investor briefings▪Research internal information–Risk management and governance policies–Committee charters–Strategy and operational plans–Existing Risk Appetite Statements–Conduct internal surveys and interviews with senior management
MONASHBUSINESSSCHOOL29ii) Identifying Stakeholders and Their Objectives▪Establishing the context involves identifying key stakeholders and developing an understanding of their objectives and characteristics.▪Stakeholders are normally identified using a systematic method, within a communications plan, that employs the experience and knowledge of a small group of people (ie. Brainstorming with experts internal and external).▪Stakeholders help clarify objectives and also the risk criteria.INTERNALEXTERNAL•Board and Senior Committees•Divisional Heads•Operation Owners•Employees•Shareholders•Debtholders•Creditors•Depositors•Suppliers•Government•Community Groups•Customers•Competitors•Media
MONASHBUSINESSSCHOOL30iii) Articulate the External and Internal Factors▪The internal and external environments are described by the factors within and outside the organisation that might influence the organisation achieving its objectives.
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