Effective risk assessment and management, implemented across the complete risk spectrum, needs to be a more integral component of all businesses. The previous focus on insurable-type risk exposures by most companies has given way to a more integrated approach to company risk management with a move towards business wide risk assessment forming its basis. Companies are now considering all risks in their business, not just asset-based ones, when formulating their risk management strategies.
"The enterprise-wide risk management approach holds that a risk is a risk, no matter what the type. All risks need to be understood and effectively managed in a consistent manner," says Paul Skivington, director, Alexander Forbes Business Risk Solutions.
This approach requires the assistance of multidisciplinary teams of specialists to ensure complete and accurate risk assessment. Although risk management may be centrally monitored, all aspects of the business should be involved in the risk assessment and management process (eg information technology, treasury and banking, internal audit, etc). As risks are often not confined to only one business area, a collective awareness and sound approach to possible problem situations is essential.
The Turnbull Report (UK) promoted this business wide approach to corporate risk management and South Africa is now following suit. "The King Report will stipulate that publicly listed companies report on enterprise-wide risk exposures in their annual reports. Shareholders now require information on existing and possible company-wide risk exposures and how these are being managed. Enterprise-wide risk management is therefore becoming increasingly essential to the achievement of business objectives," says Skivington.
"Ensuring that the risks associated with your existing and envisioned business are properly assessed could go a long way to ensuring both sound business decisions and stakeholder confidence. Companies should all be utilising enterprise-wide risk management strategies with a view to mitigating possible business risk exposures," concludes Skivington.
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