{"id":2841,"date":"2020-08-14T16:41:46","date_gmt":"2020-08-14T13:41:46","guid":{"rendered":"https:\/\/teolupus.com\/?p=2841"},"modified":"2024-03-16T11:50:48","modified_gmt":"2024-03-16T08:50:48","slug":"question-and-answers-about-corporate-management-2","status":"publish","type":"post","link":"https:\/\/teolupus.com\/en\/question-and-answers-about-corporate-management-2\/","title":{"rendered":"Risk Management: Questions and Answers\u00a0"},"content":{"rendered":"[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][vc_column_text]What is Risk Management, and how is it implemented? What is its mission, and how is it managed by whom?<\/span><\/p>\n

Institutions must evaluate their risks in today’s competitive environment by recognizing their weaknesses and strengths. They should evaluate the magnitude of risk they can take and take precautions for other risks. Companies must\u00a0improve their risk management<\/a>, internal control, and internal audit capacities. In the article below, you can find answers to questions about risk management, which is one of the most critical management tools for companies to maintain the sustainability of their activities and achieve their goals.<\/span><\/p>\n

\u00a0<\/span><\/p>\n

Risk<\/b><\/h2>\n

These are situations or events that may prevent the company from achieving its founding purposes and strategic goals and the performance of its duties or may cause unexpected damages.<\/span><\/p>\n

Risk assessment<\/b><\/h2>\n

It is the whole work that includes the development of appropriate control measures to predict, identify, reveal, and eliminate situations or events that may prevent the company from achieving its founding purposes and strategic goals and the performance of its duties or may cause unexpected damages.<\/span><\/p>\n

Risk Factor<\/b><\/h2>\n

It refers to the measurable or observable characteristics of a process that indicate the presence of risk or exposure to risk. In other words, they are the criteria used to determine the risk level.<\/span><\/p>\n

Risk Appetite<\/b><\/h2>\n

It is the level of risk that a Company is ready to accept before deciding whether to take any precautions, at any time, in line with its mission, vision, and strategic goals it is trying to achieve.<\/span><\/p>\n

Risk Control Matrix<\/b><\/h2>\n

It is a standard and essential working paper whose form and content are specially determined and used in the audit task. RKM is to rate the sub-activities\/processes within the scope of the audit area according to their risk levels. It includes the sub-activity or process, inherent (natural) risks, existing controls against them, tests to be applied, and risk levels.<\/span><\/p>\n

Risk Register<\/b><\/h2>\n

It is a central risk register where the significant risks of a Company are recorded. Here, risks are defined by classifying them according to their impact, probability, area, and type. The risk log may also include who is responsible for managing the risk, potential risk factors, and indicators.<\/span><\/p>\n

Risk Prioritization<\/b><\/h2>\n

It refers to comparing risks and ranking them according to their importance in terms of achieving the Company’s goals and objectives. Prioritized risks refer to the risks that require the most attention from the administration’s perspective and where priority efforts must be made to eliminate or reduce their effects.<\/span><\/p>\n

Risk Classification<\/b><\/h2>\n

Part of the risk assessment process is the categorization of risks. Risks typically include: are classified as high, medium, and low.<\/span><\/p>\n

Structural Risk<\/b><\/h2>\n

It is the risk arising from the existing structure of the Company or the nature of the activity carried out when existing controls and measures are excluded.<\/span><\/p>\n

Risk management<\/b><\/h3>\n

The management process ensures the implementation, review, and reporting of the necessary controls to identify, evaluate, and keep the impact of risks at an acceptable level.<\/span><\/p>\n

Risk Based Audit<\/b><\/h3>\n

It is an audit approach that envisages identifying risk factors related to the company’s areas of activity, measuring risk levels, evaluating the effectiveness and adequacy of the controls applied for these risks, and giving audit priority to high-risk areas.<\/span><\/p>\n

Macro Risk Assessment\/Analysis<\/b><\/h3>\n

Activity\/process\/project included in each audit area in the audit universe by IDBs: It is evaluated to determine audit priorities in line with risk factors, taking into account the goals and objectives included in the strategic plans of the institutions and the opinions of senior managers and executives.<\/span><\/p>\n

Micro Risk Assessment\/Analysis<\/b><\/h3>\n

It is the risk analysis model used by internal auditors during audit tasks.<\/span><\/p>\n

Coso Frameworks<\/b><\/h2>\n

COSO\u00a0(The Committee of Sponsoring Organizations of the Treadway Commission)\u00a0There are two frameworks published initially:<\/span><\/p>\n

\u00a0<\/span><\/p>\n

The Internal Control-Integrated Framework, one of which was published in 1992, was revised in 2013.<\/span><\/p>\n

\u00a0<\/span><\/p>\n

The other one is \u201cEnterprise Risk Management-Integrated Framework,\u201d published in 2004.yes” say(Enterprise Risk Management \u2013 \u200b\u200bIntegrated Framework). It was republished in 2017 under the Corporate Internal Control Framework Aligned with Strategy and Performance.<\/span><\/p>\n

COSO ERM 2017 Components and Principles<\/b><\/h2>\n

The five interrelated components and their 20 principles included in the renewed COSO Enterprise Risk Management Framework are briefly expressed below.<\/span><\/p>\n

Core Principle 1: GOVERNANCE and CULTURE<\/strong><\/p>\n

Principle 1: The Board of Directors Performs Risk Oversight<\/span><\/p>\n

Principle 2: Creates the Operational Structure<\/span><\/p>\n

Principle 3: Defines the Desired Culture<\/span><\/p>\n

Principle 4: Shows Commitment to Core Values<\/span><\/p>\n

Principle 5: Attracts, Develops, and Retains Talented Personnel<\/span><\/p>\n

 <\/p>\n

Core Principle 2: STRATEGY and GOAL SETTING<\/strong><\/p>\n

Principle 6:\u00a0Analyze the Business Environment\u00a0<\/span><\/p>\n

Principle 7: Defines Risk Appetite<\/span><\/p>\n

Principle 8: Evaluate Alternative Strategies<\/span><\/p>\n

Principle 9: Creates Business Goals<\/span><\/p>\n

 <\/p>\n

Core Principle 3: PERFORMANCE<\/strong><\/p>\n

Principle 10: Identifies risks<\/span><\/p>\n

Principle 11: Evaluate the Severity of Risks<\/span><\/p>\n

Principle 12: Prioritizes Risks<\/span><\/p>\n

Principle 13: Apply Risk Responses<\/span><\/p>\n

Principle 14: Portfolio Develops Perspective<\/span><\/p>\n

 <\/p>\n

Core Principle 4: REVIEW AND CORRECTION<\/strong><\/p>\n

Principle 15: Evaluate Significant Changes<\/span><\/p>\n

Principle 16: Reviews Risks and Performance<\/span><\/p>\n

Principle 17: Pursues Improvements in Enterprise Risk Management<\/span><\/p>\n

 <\/p>\n

Core Principle 5: INFORMATION, COMMUNICATION and REPORTING<\/strong><\/p>\n

Principle 18: Benefits from the Advantages of Information and Technology<\/span><\/p>\n

Principle 19: Communicates Risk Information<\/span><\/p>\n

Principle 20: Reports on Risk, Culture and Performance<\/span><\/p>\n

 <\/p>\n

Sarbanes-Oxley Act<\/b><\/h2>\n

The Public Company Accounting Reform and Investor Protection Act, or Sarbanes-Oxley Act, which is seen as an effort that aims to improve companies’ controls over their financial reporting and at the same time supports effective corporate governance, covers all 30 publicly traded companies traded on stock exchanges in the United States. It was signed in July 2002. Within the framework of Articles 302 and 404 of the Law, it is obligatory to determine the risks in companies’ financial reporting and to document and evaluate the controls related to the identified risks. Company managers are held directly responsible for the effectiveness of the controls.<\/span><\/p>\n

\u00a0<\/span><\/p>\n

Resources<\/b><\/h2>\n
    \n
  • IPPF (International Professional Practice Framework) – Standards, Practice Recommendations, Practice Guides)<\/span><\/li>\n
  • Public Internal Audit Guide (Public Internal Audit Coordination Board Ankara September 2013)<\/span><\/li>\n
  • \u0130SMMMO-Practical Information for Internal Audit in SMEs 2013<\/span><\/li>\n
  • Teolupus Internal Audit Guide Studies<\/span><\/li>\n<\/ul>\n

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