Identifying all the risks which may impact your organisation may be difficult. Unforeseeable risks may impact your business at any time. The consequences of being unprepared can be extreme. Disruption, in its widest form, is not about to disappear.
Any successful organisation knows that managing risks and the impacts of disruption is critical. As an organisation, you would want to do this within a well-defined risk management structure. Effective risk management provides the frameworks, mindset, and culture to look towards your future with confidence and clarity.
Well planned and tested risk management practices generate extraordinary value-added for your business.
The initial stage for applying effective risk management is to establish a governance structure which distinguishes between the executive and monitoring roles.
Organisations need to set their risk management framework which, will not only determine the risk management process, but also establishes the required protocols for enabling risk communication and the sharing of risk information. The framework assigns also the different roles required to ensure a best-practice risk management process.
Once the governance structure and risk management framework are determined, organisations will then be led into applying a risk management process and embedding it into their core business processes. This includes:
- establishing the organization’s risk profile based on its external and internal environment;
- identifying the organization’s risk universe using applicable risk identification techniques;
- identifying, analysing, and documenting risk controls;
- assessing risks using applicable risk assessment techniques;
- determining the organization’s risk appetite;
- evaluating risks based on the organization’s risk appetite;
- monitoring the organization’s risk profile; and
- reporting on risk related matters, both internally and externally.
Management are constantly required to compile reports that reflect their organization’s risk profile which are presented for internal or external consumption. There are various methods and techniques on how risk information can be reported internally, depending on who the stakeholders are: the board, management, specific departments, for example. External risk reporting to external stakeholders might also be required, with examples of recipients including regulators, potential investors, suppliers and/or customers.
Organisations are required to manage their risk profile to protect themselves from threats which may affect their interests and objectives, their market share, and their future perspectives.
BDO is here to help.
We do not merely see “more controls are required” or “risks need to be mitigated further” as the answer to every question. We take a broader look and consider the business environment as well as its requirements when recommending or implementing solutions.
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