King II's take on risk management

May 2003 Security Services & Risk Management

The recently published King II Code on corporate governance advocates that companies develop risk management and internal control systems.

Effective corporate governance must, therefore, incorporate formalised risk management strategies aimed at safeguarding stakeholder interests.

The new Code on corporate governance, commonly known as 'King II', entrenches the principles of sound risk management and outlines a number of risk management-related requirements for South African organisations (including the appointment of a board committee to review the risk management process, the completion of an annual risk assessment and a number of disclosure requirements).

"The majority of companies, however, are still grappling with the mechanics involved in implementing these principles, including how to integrate the various recommended risk management functions (eg, internal audit, insurance, treasury risk management, etc), which methodologies to utilise, how to manage their information reporting systems and how to respond to identified business risks," says Dr Steven Briers of Alexander Forbes Risk Services.

Noninsurable risk

"Risk identification and evaluation methodologies must be consistent and effective. In our experience, only 10 to 15% of enterprise risks are insurable and utilising risk management specialists is therefore a prudent option when expediting this requirement.

"The roles and responsibilities of the various risk practitioners within an organisation, eg, risk managers, internal auditors, etc, is another much-debated concern. King II, however, stipulates that a company's board of directors is responsible for the risk management process, making the role of in-house risk management specialists one of facilitation. A company's board must, as a minimum, ensure that internal systems of control are developed, that risk management is an on-going process and that procedures are in place to regularly review control system compliance and efficacy. Directors are responsible, and being held accountable, for any company failures or losses," adds Briers.

Identifying risk

"Responding to the findings of 'enterprise-wide' risk assessments is, for many companies, proving difficult as there are no ready-made or off-the-shelf solutions to managing identified risks. Many risk professionals, accustomed to utilising technical, textbook solutions to risk management, are no longer able to apply such an approach as they cannot be applied to 80 to 90% of enterprise risks. Risk management professionals now need to collaborate in order to provide the most appropriate and effective solutions to a company's business risks.

"South Africa (as with any other emerging economy) is competing for foreign investment. Sound risk management and financing programmes are increasingly being viewed as 'strategic weapons' in the battle for shareholder value as fund managers and local and international investors are now demanding that companies evidence good corporate governance before committing funds.

"The limited capacity of the world insurance market, and resultant high prices, have led many clients to question the benefits of insurance and risk management which have, historically, been viewed as an expense with no obvious returns. Enterprise-wide risk management and King II, however, further advocate that risks, if understood and effectively managed, can be associated with opportunity, again contributing significantly towards the sustainability of businesses and market development.

"The new Code of corporate governance should not be viewed as a set of rules to be obeyed but rather as an opportunity to address the issues surrounding business sustainability, investor confidence and shareholder equity," concludes Briers.

For more information contact Cindy Maulgue, Alexander Forbes Risk Services, 011 378 3869.

Share this article:
Share via emailShare via LinkedInPrint this page

Further reading:

Communication in any situation
Issue 8 2020, Elvey Security Technologies , Global Communications , Security Services & Risk Management
Global Communications offers an industry-first with five-year warranty on select Kenwood two-way radios.

The year resilience paid off
Issue 8 2020 , Editor's Choice, Security Services & Risk Management
Hi-Tech Security Solutions spoke to Michael Davies about business continuity and resilience in a year when everything was put to the test.

mySOS targets neighbourhood safety
Issue 2 2021 , Security Services & Risk Management
Beyond protection for valuables and premises, people are also looking to ensure their personal safety and that of their loved ones as they move around and within community areas.

Staying safe with tap-and-go
Issue 2 2021 , Security Services & Risk Management
When it comes to tap-and-go functionality, security does not fall within the ambit of only one particular link in the value chain; banks, retailers and users have a part to play in safeguarding these devices and transactions.

Personal safety at your fingertips
Issue 2 2021, Otto Wireless Solutions , Security Services & Risk Management
The PB7GSM personal tracker is a small, powerful, personal tracking system that enables users to immediately alert up to three pre-selected cellphone numbers in any emergency.

A new era of digital buildings
Issue 2 2021 , Security Services & Risk Management
The impact of the COVID-19 pandemic has accelerated the need for digitally integrated buildings, as organisations have had to implement strategies to adjust to new ways of working to improve efficiencies, reduce costs, mitigate security risks and implement health and safety measures.

Free technology to boost future careers
Issue 2 2021 , Cyber Security, Security Services & Risk Management
A global shortage of cybersecurity professionals has become so severe that companies are increasingly at risk from hacking and industrial espionage.

PoPIA: How the ‘Operator’ must use personal information
Issue 2 2021 , Security Services & Risk Management
While much focus has been placed on the roles and responsibilities that must be fulfilled to meet the standards of the Protection of Personal Information Act (PoPIA), the role of the Operator must also be highlighted.

Banking on radio
Issue 2 2021, Global Communications , Security Services & Risk Management
Communicating between built-up and remote areas is often not possible using cellular technology since signals may be poor or non-existent. This is where two-way radios come to the fore.

Dealing with farm attacks
Issue 2 2021, Technews Publishing , Editor's Choice, Integrated Solutions, Security Services & Risk Management, Agriculture (Industry)
Brutal farm attacks are unfortunately a common event in South Africa. Laurence Palmer suggests a proactive, community-based approach as the optimal way to prevent these heinous crimes from happening in the first place.