COME BACK ENTERPRISE COMPANIES

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Tips to Develop Efficient Operational Risk Management

Operational risk management deals with the grass root levels of a company. Operational risks arise due to human actions, technology, processes and external factors. Most of those risks are generated inside the walls of your company and can be identified and treated even before they occur.

Efficient operational risk management can be achieved by identifying underlying operational risks running in your company. Employees are your main channel of enterprise risk management. So build good rapport with them and look out for the following behaviours:

A silent approach from the employees…

If your organization believes in one-way traffic by providing instructions and not taking feedbacks, then it is time to rebuild your work culture.

Employees should be made aware of prominent and impending risks. Since they are the ones familiar with every basic function of the company, they will be the first ones to spot a threat. Give your employees the autonomy to analyse risks and use an unrestricted gateway to reporting their speculations.

Risk managers can engage with employees on personal levels to learn the remarks and responses towards a range of functions from introducing the new process to the company’s ORM software solutions.

Have your top-level executives taken risk management seriously?

Enterprise risk management needs coordinated efforts of every entity in an organization. And operational risk management takes lead when it comes to the involvement and guidance of management.

You might have installed an ORM software, but ensure that everyone from the top-level executives to the subordinate members are included in the system. Management will motivate the employees to follow their lead and abide by the operational risk management solutions.

Training you resources

In today’s competitive business world, training is not just to evade or move ahead, but to mitigate the possibility of risks.

Employees are your assets, train them to gain individual fortitude and build team strength.

Risk Managers: What Is The Difference Between Risk Management Software VS Spread Sheets

All of us have been using spread sheets and off course we love them. Spread sheets are the ones that would help you analyses the budget of your family, create statistics on the production and the risk assessment process. Wait a second. What was that. Risk Management through Spread Sheets? I am sure some of us must be scratching our head asking how is that possible, where as others may be feeling shy looking away with a small amount of guilt churning in your stomach.

Reassured i am sure that you are not the first one to deal with spread sheets especially when it comes to risk management. Using risk management would help you learn the formulas, checking the cell links, ensuring proper formatting, and risking the human error in the certification auditing program. This is the main inspiration behind our risks management software offering one of the best solutions to the risk management process and not the spread sheets. 

 

The Use of Spreadsheet programs for a better risk management

Spreadsheet programs are considered to be the most essential part of the business and have been utilized for a variety of tasks world wide. The adaptability of these spread sheet programs have led to their use without considering the other solutions. They have been successful in offering features and attributes that have been beneficial for all the risk managers and are bounded with certain limitations.

• A One Time Risk Assessment for Small Business Organizations: When smaller business organizations with limited operations need to complete and succeed in a single risk assessment, it would be proved to be beneficial when you complete risk assessment through a spreed sheet program. And in case of the assessment that has to be repeated the task tends to become tedious resulting in the users managing spread sheets as opposed to risk management.
• No Purchase is required if a spread sheet is already owned by the business organization: Most of the business organizations have already purchased the spread sheet program utilizing the open source of the spreadsheet programs.
• Documents been already shared and transferred between the computers: When business organizations have been having an enterprise version of a spreadsheet program, risk assessments would and can be easily emailed, and placed within the collaboration software allowing you to share it through out the business organizations.
• A proper and a customizable format: Risk managers using the spread sheets program have a better option of customizing the major aspects of risk assessment starting from the calculations to the aesthetics.

Limitations of a Spreadsheet program:

• Sharing out an un protected document: While sharing out the documents related to risk assessment, you run out the risks of edits and changes being made without any sort of the document owners consent. This would lead them to an un approved version of making its publication with a record of when and what changes were made.
• Process of Calculation creation: While utilizing the spread sheets for the risk assessment program users here would have to create and do a proper research on risk calculations that need to be implemented. This could be a daunting task and a time consuming process. Also while implementing these calculations, the risks of utilizing the formulas that are not consistent enough through out their scope increases.
• Repeatability: Risk management process is usually completed many times due to several reasons be it the auditing process or the improvement process. Spreadsheet risk assessment program cannot be set up to be easily repeatable. If the person in charge of the operational risk management process creates the risk assessments and leaves the organization due to a specific reason, then the method used would not be clear unless there is any proper documentation. And in case the document is not created with this assessment then this new assessment may not have to be created.

Risk assessment process can be a complicated process unless you use the right tool at the right place. Organizations here must identify and mitigate risks before they would occur to ensure us with a reliable service maintaining the organizations reputation. Not using an automated and a centralized tool organizations are fray enough and would connect to the risk variables at hand and distinguish the organizations overarching risk position.

Best practices in Operational Risk Management

Businesses have become global and more organized in the present financial world together with the sophisticated of financial technology. Advancing technology has also invited complexity in the activities of the financial institutions and the level of risk across a firm.

Establishing best practices in Operational Risk Management includes the risks other than credit, interest rate and market risk can be substantial.

Some of the novel risks that have emerged for the financial institutions include:

Advanced technology:

Technology has to be applied to reduce the human errors arising from manual processing. However, too much dependency on technology sometimes may give rise to the system failure errors.

Data Security:

With the evolving cloud-based businesses (e-commerce), potential risks like internal and external fraud and system security issues have come up.

Proper Maintenance and Backup:

The financial institutions have evolved a leader as service providers. This calls for greater maintenance of high-grade internal controls and back-up systems.

According to the new Basel Capital Accord that was proposed in 2001 has stated Operational Risks as a distinct class of risk that of course, differs from credit risk and market risks. It is termed to be a significant contributor to any financial institution's risk profile. The regulation also suggested various approaches to assess the operational risk exposure for a financial institution. These approaches have however evolved over time and today the level of complexity under various approaches varies widely.

Below listed are some of the best possible practices that can be applied by any organization:

Organizations must have a thorough understanding of:

·         The place of Operational Risk Management (ORM) in the context of risk management.

·         The proper knowledge on the significant difference between Operational Risk Management and Operational Risk Measurement.

·         Best practices for the ORM.

·         Significance of operational risk in Governance, Risk and Compliance and Enterprise Risk Management frameworks.

·         The procedures and policies required to support ORM.

Often the ORM function in any financial institution forms a part of central risk function. Any organization can achieve the best possible protection against the negative impact of the potential risks and can achieve best growth opportunities with ORM.

Identifying Operational Risks to your Business

Operational Risk Management continues to be an unfamiliar word in many of the countries. They fail to realize the importance of integrating it into their day-to-day business practices. Operational

risk is somewhat different from market or credit risk by being endogenous to the ministry of finance.

Operational Risk Management (ORM) is all about the business environment, the nature and complexity of operational processes, the systems in place, level of management and governance. It also deals with the external events like the natural catastrophe.

There is no perfectly defined regulatory pressures to put or adequate measures to monitor and control these category of risks. According to Basel II defined by The Basel Committee, an ORM framework is necessary for the business operating environment appropriate to its range and nature of treasury operations.

ORM enables the managers and decision makers to develop a wide overview across the enterprise in a holistic way in order to create a properly defined risk profile. This in turn will allow the business heads and the boards to utilize the framework for further governance of the organization. Operational

risks is a more dynamic subject.

Some of the elements of operational risks includes:

• Compliance
• Credit risks
• IT risks
• Investment
• Transaction processing
• Human resources
• Liquidity
• Taxation
• Fraud

Operational risk is an intrinsic part of all financial institutions and is a mandatory practice embed in the governance since the nature of risks are changing everyday. It is a standard recommended procedure for banking products, activities, processes and systems. Therefore it has always been an inevitable part

of any bank's risk management program.

A number of banking institutions are looking forward to adopt effective operational risk governance practices. The key to a sound risk management however lies in understanding the nature and complexity of operational risks. So go ahead and identify the operational risks surrounded in your business.

Upscale Your Internal Audit

Internal Audit Programs are continuously improving to suggest ways that can help make your business do better. It is no longer the traditional approach of just indicating inefficient processes and procedures.

Organizations are under intense economic pressures to constantly upgrade processes and introduce innovation to excel in business.

In the attempt to rapidly deliver high performance, organizations are driving sustained efforts. One such area of improvement is internal audit. Audit managers has the potential to contribute by enhancing processes through integrating performance improvement audits into the audit approach.

Auditors need to focus and monitor processes regularly into 4 main areas- Compliance, Risk-Identification and Performance Improvement.

They need to bridge the gap and establish effective communication with the stakeholders who include Audit Committee, Governance and Nominating Committee, Risk Committee and Management.

3 Challenges Faced By Organizations:

Empowering the Internal Audit Committee & Prioritizing Areas to Focus:

An expert panel of auditors with the correct skills nurtured by the Organization is a true asset to it. The company must always attempt to broaden the asset capacity to address performance. The new reforms of complying with SOX legislation have limited many audit functions. This has resulted in the auditors doubting their operational and business process knowledge.

Creating Value:

The internal auditor skills must give return on investment for the organization. The Internal Audit group must provide intangible value that must address issues that was overlooked for a long time.

Companies must not rely solely on manual accounting solutions. Automated softwares and internal audit solutions are the most effective protection against the devastating errors.

Limitations to Accept Internal Auditors:

Many management groups might not readily accept internal auditors to thread into every area of business. It is therefore vital for the auditors to maintain good relation with the management in order to skillfully step into various departments of the business.

Thus new-age internal auditors have the capacity to adapt themselves to value-oriented activity aimed towards enhancing the performance of the company and at the same time keeping up its values. It points out key vulnerable areas of the business so as to avoid the risks drive excellence every day.

Risk Management Practices Evolves In 2014 for Financial Institutions

A successful organization is the one who is always ready to take appropriate risks strategically and wisely. The reformed range of rules for the financial institutions has enhanced the global capital and liquidity rules in order to achieve a pliable banking sector.

Research done by eminent banking supervisory authorities shows 10 reputed global banking institutes will fail to achieve the risk data aggregation and risk reporting time limit of 2016. It is always advised to the internal auditors to follow correct the risks in the business.

Another analysis done on C-level executives from more than 430 global companies in the field of  banking & capital markets, insurance, energy & utilities, health, and public service industries says that the Enterprise Risk Management is top concern for all of them in 2014 than before. The reason for this is the evolved nature of the risks that includes Strategic risks, operational risks, credit risks, and market risks.

Role of Internal Auditors:

Internal audit plays a significant role in the implementation of Enterprise Risk Management (ERM) for an organization. Some of them have been elaborated below:

Explaining the board and management on the importance of ERM:

The internal auditors can educate the senior management on the importance of internal audit as well as ERM and their implications on the organization. Through a standard risk management framework, he can explain the various component of ERM. This will help the organization to develop focused audit plans following the declaration of audit results.

Promote the Risk Assessment:

Risk assessment is a vital step that can keep on track of the progress of  ERM. An Internal Auditor can efficiently facilitate the risk assessment process and provide appropriate risk response.

Evaluate the Risk Management Process:

The risk assessment process ought to be evaluated considering Objective Setting, Event Identification, Risk Assessment and Risk response Components. Even the effectiveness of evaluation needs to be monitored.

Taking the above role of internal auditors into account, it can be considered that the new set of rules defined by Basel III will definitely stimulate the implementation strategy for ERM in all corporates. That will be followed by adopting enhanced corporate governance practices by all organizations thereby improving the risk compliance culture.

Manage All Your Surprises Today Through ERM Software – Best Solution For Your Businesses

As organizations have began turning their attention more towards enterprise risk management software programmes automating and enhancing each and every aspect, it is high time that one takes a crucial step looking at the ERM and GRC marketplace determining whether the gaps would exist between the current offerings along with the need of risk managers or not. Many GRC tools on the market place offer a separate erm module at a additional cost. If the major goal of enterprise risk management of to take information and communicate with a single frame work it does not make any sense to offer erm as a part, or a module, or of a platform.

Enterprise risk management need to vary when evaluating erm software and there a few questions that they need to ask before moving ahead with the entire process.

• Does your solution support the best practices outlined by the ERM software framework?

The answer from the enterprise risk management perspective needs to be the unqualified yes. There are resources made available for all these risk managers that could provide a frame work in erm programme and if erm solution in question does not explicitly adhere to one of these standards it is likely to find yourself at a road block only a two year or down the road. ERM Program mes have been forced to operate with the tools not designed for enterprise risk management software becoming frustrated with their results.

• Is your ERM Solution flexible enough to fit in the unique and revolving responsibilities of your specific programme?

Enterprise risk management have been tasked with enough responsibilities providing transparencies and insights into their organizations risk universe. And in order to accomplish these goals it is very important that the erm software have to be cross functional and capable enough of aggregating the information dynamically. Check to see the information aggregated by the goals, the geographic locations or by the categories that have been currently in use by you and your business organizations.

• Does your erm software provide necessary support to ensure success?

Many erm programmes are said to be just the beginning for evaluate the software. Having worked hard to build to build the business case, one needs to set aside the budget and evaluate the solutions than choosing the worst case scenario selecting enterprise risk management software that would take a lot of time and bring good results. Risk managers need not have to put much efforts in order to afford a lengthy implementation time frame while they work towards a milestone justifying their solutions.

Evaluating a ERM software programme is a stressful process so we have services that would be a best example of how you would adjust and fit with the needs based with your needs and requirements. To know more about enterprise risk management visit us at CAREweb today.

4 things You Must Know About Risk Appetite

Effective Enterprise Risk Management calls for defining your risk appetite. This means not just quantifying your risk, but to take communicative approach. A thorough understanding of an organization's business model and its operations enables to define its risk appetite. The basic questions required to be focused upon while stating the risk appetite of an organization are in two context.

Ability of Risk taking

Willingness to take Risk

The ability to take risk depends upon financial position of the organization while the willingness to take risk is articulated by the C-suites of the organization. When the risk appetite framework is transparent and slated clearly, it enables a company to achieve more from its risk.

Initiating the Dialogue Through a Risk Appetite Statement:

The risk appetite of an organization is reflected when the management and the Board of directors take decisions for the organization. When a risk appetite statement of an organization is stated, it commences a continuous, strategic conversation between management and the board. The three key elements of risk appetite statement are:

• Acceptable risk appetite: An example of acceptable risk can be Market Growth.
• Undesirable risk: Risks that are off strategy risks can be Reputation and Brand Image or financial derivatives.
• Strategic, financial, and operating risks: Strategic parameters of risks are investment limits. On the other hand, financial risk parameters include target debt rating or financial strength. Operational parameters of risks are loss exposure, sustainable business model, and customer dependence.

The Effect of Risk Appetite on Management of the Organization:

The management of the company considers risk appetite when it states its objectives, formulates strategy, allocates resources and sets the risk tolerances. When pronounced precisely, the risk appetite gives an overall direction for risk management and becomes the base of the objective setting process. When a company faces a tough time to meet the target objectives, it displays its risk appetite.

Furthermore, lack of consistency and short term focus to the board and stakeholders is reflected by the drastic changes in parameters in the risk appetite.

Effectively Communicating Risk Appetite Using the Risk Appetite Statement:

Risk appetites are assimilated with strategy, budgets, and policies and often contain confidential

information. The communication of risk in between the management and board of directors should continue. Every employee of the organization should be familiar with the risk management issues. It is the senior management who conveys this risk appetite to its employees. Many companies tend to disclose their risk tolerant limit in the public disclosure.

Considering the present health of the company and current market scenario, a copy of Risk appetite should be presented to the Board every year to update it.

Maintaining the Risk Appetite Statement to Monitor Risk Profile Expectations:

Risk appetite statement can be used as an effective tool to boost corporate governance by provoking conversation between management and the board. The three steps to monitor risk profile can be:

• Research the historical and establish inherent risk appetite of the company.
• Review and revise the risk appetite statement.
• Finalize risk appetite statement and modify tolerances to assure they are consistent with risk appetite.

The risk appetite of an organization can be determined by following the management of the organization regardless of whether or not the organization has defined its risk appetite. A dynamic enterprise risk management approach is evident from an organization that facilitates the communication of risks and framework for the selection between strategic alternatives.

A well crafted risk appetite statement is expected to be:

Comprehensive: it should have the appropriate elaboration, pronouncing the coverage of risk landscape,

and depth, and it must address the key risks that otherwise limit the targets of the company.

Concrete and Practical: all financial risks should be identified and quantified with the aid of risk tolerances. For risks that are difficult to quantify, the company must define qualitative boundaries.

Consistent and Coherent: The risks implemented should be balanced by the risk tolerant boundaries. Risk appetite should link these measures to the business model.

A perfectly tailored risk appetite gives way to the fulfillment of ambitions of the organization. Moreover it serves as an essential tool to improve the organizational sequencing in terms of risk and performance. For more details on enterprise risk management visit us at CAREweb.

 

Risk Based Internal Audit And The Role and Responsibilities

According to RBIA Risk Based Internal Audit is a process of identifying the risks of each and every area of a particular business, that is identified, measured, and controlled on priority basis. Another definition here is – understanding the roles and responsibilities of the Risk based internal audit function. The institute of internal audit offers the business organization with the following description.

                            Internal audit is an independent, objective assurance, and consulting activity designed to improve and add a value to the business organizations and improving their operations. It helps the business organizations to accomplish its objectives bringing  an systematic approach in order to improve its effectiveness and control the governance process. The major role and responsibilities of risk based internal audit include the following:

• Provides a major support to the company anti fraud programmes.
• Engages in continuous education and staff development.
• Evaluates regulatory compliance programme with consultation from legal counsel.
• Evaluates the organizations readiness case of business information.
• Maintains an open communication with management and audit committee.

A risk based internal audit is one of the best approach to ensure the practices of maximizing the impact of audit focusing on the major strategy, regulatory, finance and operational risks that would confront an organization. To know more about internal audit visit us at CAREweb.

What Enterprise Risk Management Is Exactly All About.

Ok the good news is that the ones who are using enterprise risk management programme are really started getting some transaction. More and more people are talking about it, the regulators are encouraging it(read: requiring it) and more and more articles are being written about it. And thats all too good the actual problem comes here. The vast majority of population still have no idea of what enterprise risk management is actually all about and how it actually looks like.

Cisco has defined Enterprise risk management software as a process that is effected by an entity board of directors, management and personal, applied in the strategy setting and across the enterprise, that is designed to identify all the potential events that would affect the entity and manage the risk within its risk appetite, providing reasonable assurance regarding the achievement of all the entity objectives. Ok now when this was the definition for erm software, what is erm i still dont know.

Its so easy when we develop a management technique and give it a name when we come up with a name and then try to engineer the technique. You would end up with different techniques and opinions on what looks like and more on how you should build it. Ultimately this is not that great approach. So if like all others you have read each and every scrap of english literature and find your self still saying what exactly erm software is all about take heart and you are in a very good and a good company.

The big problem is that with so many definitions and descriptions that you read is that they are already ignoring the simple fact managing the risk fact that the enterprise risk management is very very complicated. Risk comes in thousand forms and risk management will always be comprised of many elements in short. In short the enterprise does not mean one central system. It means we understand and manage how these pieces fit together and it is this that is actually missing.In this piece of content i have endeavoured to look at erm as a brutally honest and practical perspective as much as possible. And i hope that it would give some of the best concrete points to think about the erm programme. To know more on erm software visit us at

http://www.care-web.co.uk