Implement Enterprise Risk Management | Risk Management ...

Organizations have long practiced various parts of what is called risk management business. Identification and prioritization of risks, either with prognosis after a disaster has long been a standard management activity. In terms of risk transfer, if the insurance or other financial products has also been a common practice, such as contingency planning and crisis management.

What has changed, starting near the end of last century, is the treatment of a wide variety of risks holistically, and increased responsibility for risk management leadership. Although practices have not progressed in some industries and organizations uniformly different, the general trend towards the MCE is characterized by a series of engines.

What is risk management?

Risk management is simply a systematic practice of selecting cost effective approaches to minimize the effect of making a threat to the organization. All risks can not be totally avoided or mitigated simply because of financial constraints and practices. Therefore, all organizations have to accept a certain level of residual risk.

Believes that risk management in general, prevention, business continuity planning (BCP) was invented to deal with the consequences of the actual residual. The need for a BCP in place is because even very unlikely events that occur, if they are given enough time. Risk management and BCP are often mistakenly seen as rivals or overlapping practices. In fact, these processes are so closely related that such separation seems artificial. For example, the risk management process creates important inputs for the BCP (assets, impact assessments, cost estimates, etc..) Risk management also proposes to apply the controls of identified hazards. Therefore, risk management covers several areas, which are vital for the BCP process. However, the BCP process exceeds the risk management is a proactive approach and moves from the premise that to understand the disaster at some point.

Financial risk management is a practice of creating value in the company using financial instruments to manage risks. The same general risk management, financial management requires the identification of sources of risk, risk measurement, and to address them. As the specialization of risk management, financial management focuses on when and how to protect themselves by using financial instruments to manage exposure to risk expensive.

In the banking sector worldwide, the Basel generally adopted by internationally active banks for monitoring, reporting and exposing operational, credit and market risks.

He currently works for Compass Bank, a regional bank smaller, the same overall risk is still evident. Since filing the fraud, including check kiting, fraud, insider trading, Internet Banking, and robbery. Compass Bank is ensured constant monitoring, control, or to renew and re-implemented.

Finance theory (ie, financial economics) prescribes that a company must undertake a project when it increases shareholder value. Finance theory also shows that firm managers can not create value for shareholders, also known as its investors, taking on the project, the shareholders can do for themselves at the same price. When applied to financial risk management, this implies that firm managers should not hedge risks that investors can hedge for themselves at the same price. This concept is captured by the proposal irrelevance of coverage: In a perfect market, the company can create value by covering the risk when the price of bearing that risk within the company are the same as the price of the importance of outside the company. In practice, financial markets are unlikely to be perfect markets. This suggests that firm managers likely have many opportunities to create value for shareholders through financial risk management.

The trick is to identify risks that are less expensive for the company to manage than the shareholders. A general rule is that the market risks that lead to particular risks for the company are the best candidates for financial risk management.

Why the change?

Sarbanes-Oxley Act of 2002 (Pub. L. No 107-204, 116 Stat 745, also known as the Reform Public Company Accounting and Investor Protection Act of 2002 and commonly called SOX or Sarbox; .. 30, July 2002) is the United States federal law passed in response to a series of corporate and accounting scandals including those affecting Enron, Tyco International, Peregrine Systems and WorldCom (MCI recently and now is now part of Verizon Business). These scandals resulted in a decline in public confidence in the accounting and reporting practices. The name of the sponsors Senator Paul Sarbanes (D-Md.) and Rep. Michael G. Oxley (R-Oh.), the bill passed the House by a vote of 423-3 and 99-0 in the Senate. The law is very broad and establishes new or enhanced standards for the boards of all U.S. public companies, management and accounting.

The Act contains 11 titles, or sections, which range from the Corporate Board responsibilities to criminal penalties, and requires the Securities and Exchange Commission (SEC) to implement rulings on requirements to comply with the new law. Some believe that the law was necessary and useful, others believe that more economic damage than it prevents, and others observe how essentially modest the Act is compared with the rhetoric that accompanies heavy.

The first and most important part of the Act establishes a new quasi-public agency, the Public Company Accounting Oversight, which is responsible for the supervision, regulation, inspection and discipline accounting firms in their role as auditors of the companies. The law also covers issues such as auditor independence, corporate governance and improved financial reporting. It is considered by some as one of the biggest changes in U.S. securities from the New Deal in the 1930s.

Sarbanes-Oxley Act, most provisions are:

Or Create a public accounting oversight board of companies (PCAOB)

o A requirement that public companies evaluate and disclose the effectiveness of internal controls over financial reporting and independent auditors for companies as ?faith? (ie, agree, or qualify) to the disclosure

Or certification of financial reporting of CEO and Chief Financial Officer

The independence of the auditor O ?, including the absolute prohibition of certain types of work to their audit clients and pre-certification audit committee?s independent auditors for all other

Or the requirement that listed companies have independent audit

Committees, which oversee the relationship between the company and its auditor,

Or ban on most personal loans to CEO or leader

or accelerated reporting of insider trading

o Prohibition of insider trading during periods of pension fund blackout

Or the other disclosure requirements

o Improvement of criminal and civil penalties for violations of securities law

fine or maximum imprisonment of significantly longer and more for corporate executives who knowingly and willfully misrepresent the financial statements, although maximum sentences are irrelevant because judges generally follow the Federal Sentencing Guidelines in setting in actual sentences

Or personal protections allowing those corporate fraud whistleblowers who complain to OSHA within 90 days of winning again, back pay and benefits, compensation, and Congress to reduce the side orders, and attorneys? fees and costs.

But passing a law with a governing body to monitor the rules and regulations would be a waste of time and taxpayers? money. Sarbanes-Oxley was put into law to help the corruption and deceit to stop, to protect employees and the citizens of this scandal.

Which govern

Committee of Sponsoring Organizations Treadway Commission (COSO) is an initiative of the U.S. private sector, formed in 1985. Its main objective is to identify the factors that cause fraudulent financial reporting recommendations and decisions to reduce the incidence of cancer. COSO has established a common definition of internal control standards and criteria for enterprises and organizations can assess their control systems.

COSO is sponsored and funded by five major professional accounting associations and institutes, the American Institute of Certified Public Accountants (AICPA), American Accounting Association (AAA), Financial Executives Institute (FEI), the Institute of Internal Auditors (IIA) and Institute of Management Accountants (IMA).

COSO has established certain internal controls. The commands are as follows.

or internal control is a process. It is a means to an end and not an end in itself.

Or internal control is affected by people. It?s not just policy manuals and forms, but people at every level of the organization.

o Internal controls can be expected to provide only reasonable assurance, not an absolute guarantee that a management company and the board.

o The internal control is appropriate for carrying out one or more separate categories, but overlapping.

Internal control consists of five interrelated components. These components provide an effective framework for describing and analyzing the internal control system implemented in an organization. The five components are:

Environmental control: control environment sets the tone, organization, influencing the control consciousness of its people. And ?the basis for all other components of internal control, providing discipline and structure. Control environment factors are integrity, ethical values, operating style of management, delegation of authority and processes for managing and developing people within the organization.

Compass Bank is seeking to control the environment inside the company. We offer various foundations to help build a place of work ethic. We try to hire the ?right? candidate for the job in hopes of sucking the right mindset. But hiring the right person is not always perfect. We have been tested by unethical decisions of our employees who have put the company in court, mitigation, or prosecution.

Risk assessment: Every entity faces a variety of risks from external and internal sources that must be evaluated. One prerequisite for the risk assessment is the establishment of objectives and risk assessment and identification and analysis of relevant risks to achieving the objectives. Risk assessment is a prerequisite for determining how risks should be managed.

Internal and external risks is a constant threat to any bank, including Compass Bank. Some of the internal and external risks is the Internet and provides instant, at the request results for our customers opens the door to Internet threats and / or fraud. Assess risk, evaluate and implement security plans in place. We try to eliminate the risk before it happens.

Control activities: Control activities are policies and procedures that help ensure management directives are carried out. They help ensure that they take the necessary measures to address risks to achieving the objectives of the entity. Control activities occur throughout the organization at all levels and in all functions. It includes a series of activities as diverse as approvals, authorizations, verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties.

Most companies offer a level of control activities. Compass Bank control limits of the different activities on the basis of their position within the bank. At my level, a kindergarten, several authorities have as many as 5 million dollars in the approval of the transfer, while a customer service representative with only $ $ 100 000 the approval of the transfer of knowledge. Based on the position within Compass Bank, most activities are controlled according to the risk involved.

Information and communication: Information systems play a key role in internal control systems because they produce reports, such as operational, financial and compliance for allowing to use and manage their business. In a broader sense, effective communication to ensure information flows down to the size and upward for the organization. Effective communication should also be provided with external parties such as customers, suppliers, regulators and shareholders.

Information and communication are the key to success for a business. Compass Bank will assess the information and determines the amount of information to communicate. If the evaluation determines that there is not much risk, the information is not always shared. But if the information is needed on lower-level employees, such as the recent problem with the TJX hackers to compromise credit card information is limited information to help our customers.

Monitoring: Internal control systems should be monitored ? a process that evaluates the quality of system performance over time. This is accomplished through ongoing monitoring and evaluations. Internal control deficiencies detected through these activities should be reported upstream and corrective actions must be taken to ensure continuous improvement of the system.

Compass Bank has internal monitoring of all activities. We are constantly reviewed to ensure that we remain in compliance with all applicable federal, state and local. One thing we do every year is to ensure that all our employees for compliance testing. The test consists of bank secrecy law and the law against money laundering. Each employee must pass two tests with 80% or better. We have other setup screens, but I can not elaborate on them.

In conclusion, it is reasonable to expect that the forces mentioned above will continue. As a result, risk management practices will become increasingly sophisticated. As the capacity to continue to improve, organizations are increasingly adopting MTC controls better, as they can.

Enterprise Risk Management is an idea ?cool.? Among other things, the ECM can be considered as the general conceptual framework that unifies different parts of the actuarial discipline. ERM provides a logical structure of the field and Lin in a compelling way to form an integrated whole. Thus, the MTC. addresses issues critical to business growth and the creation, performance, consistency and value, not only expresses the risk as a threat but as an opportunity ? the reason why the grounds that the business is conducted in a free enterprise.

Tags: business continuity planning, contingency planning, enterprise risk management, financial constraints, risk management organizations

Source: http://www.ituaseconference.com/implement-enterprise-risk-management.html

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