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    Unit 3 Risk Management Part 3

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    Lylegwyneth Superticioso
    Risk management involves evaluating risks through assessing their likelihood and impact, treating risks by selecting measures to modify them such as avoidance, reduction, sharing or acceptance, and reporting on risks. Key aspects of risk treatment include setting risk policies, assigning accountability, recommending controls, and establishing contingency plans. Common risk treatment methods are internal controls, hedging, insurance, and maintaining a risk register to monitor risks. Only high risks are reported to management and boards along with both gross and net risks to show control cost-effectiveness.

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    Unit 3 Risk Management Part 3

    Uploaded by

    Lylegwyneth Superticioso
    24 views8 pages
    Risk management involves evaluating risks through assessing their likelihood and impact, treating risks by selecting measures to modify them such as avoidance, reduction, sharing or acceptance, and reporting on risks. Key aspects of risk treatment include setting risk policies, assigning accountability, recommending controls, and establishing contingency plans. Common risk treatment methods are internal controls, hedging, insurance, and maintaining a risk register to monitor risks. Only high risks are reported to management and boards along with both gross and net risks to show control cost-effectiveness.

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    Risk management involves evaluating risks through assessing their likelihood and impact, treating risks by selecting measures to modify them such as avoidance, reduction, sharing or acceptance, and reporting on risks. Key aspects of risk treatment include setting risk policies, assigning accountability, recommending controls, and establishing contingency plans. Common risk treatment methods are internal controls, hedging, insurance, and maintaining a risk register to monitor risks. Only high risks are reported to management and boards along with both gross and net risks to show control cost-effectiveness.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    24 views8 pages

    Unit 3 Risk Management Part 3

    Uploaded by

    Lylegwyneth Superticioso
    Risk management involves evaluating risks through assessing their likelihood and impact, treating risks by selecting measures to modify them such as avoidance, reduction, sharing or acceptance, and reporting on risks. Key aspects of risk treatment include setting risk policies, assigning accountability, recommending controls, and establishing contingency plans. Common risk treatment methods are internal controls, hedging, insurance, and maintaining a risk register to monitor risks. Only high risks are reported to management and boards along with both gross and net risks to show control cost-effectiveness.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
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    RISK MANAGEMENT

    Risk Evaluation, Treatment and Reporting


    RISK EVALUATION

    ▪ concerned with making decisions about the


    significance of risks to the organization and
    whether those risks should be accepted or
    whether there should be an appropriate
    treatment or mitigation
    ▪ Happens after risk analysis (identification,
    description, and estimation)
    RISK TREATMENT

    ▪ Also called risk response


    ▪ The process of selecting and implementing
    measures to modify the risk. This may include risk
    control/mitigation, risk avoidance, risk transfer,
    risk financing (e.g. hedging, insurance)
    RISK TREATMENT:
    TYPES

    1.AVOIDANCE
    a. action is taken to exit the activities giving rise to risk; for
    high-risk events
    2. REDUCTION
    a. actions are taken to reduce the likelihood or impact (or
    both) generally through internal controls 3.
    3. SHARING
    a. transfer of risk (e.g. insurance, pooling risk, hedging or
    outsourcing
    4. ACCEPTANCE
    a. no action is taken to affect likelihood or impact
    RISK TREATMENT:
    EXAMPLES OF RISK RESPONSE
    1. Setting a policy defining the organization’s attitude to a particular risk within
    its risk appetite and the objectives of the risk response;
    2. Assigning individual accountability for the management of the risk, with the
    nominated person having the expertise and authority to effectively manage
    the risk;
    3. The management processes currently used to manage the risk;
    4. Recommended business processes to reduce the residual risk (after the
    application of controls, see below) to an acceptable level;
    5. Key performance measures to enable management to assess and monitor risk;
    6. Independent expertise to assess the adequacy of the risk response;
    7. Contingency plans to manage or mitigate a major loss following the occurrence
    of an event.
    RISK TREATMENT:
    METHODS OF RISK TREATMENT
    ▪ Internal Control
    ▪ the whole system of financial and other controls established to provide reasonable
    assurance of effective and efficient operation
    ▪ Portfolio
    ▪ Hedging
    ▪ a transaction to reduce or eliminate an exposure to risk
    ▪ most common ‘underlyings’ for which hedging takes place are in relation to changes in
    interest rates and foreign exchange fluctuations (but also exist for commodities, stocks
    and bonds)
    ▪ Insurance
    ▪ involves protection against hazards by taking out an insurance policy against an uncertain
    event
    RISK TREATMENT:
    RISK REGISTER
    ▪ After identification, description and estimation, risk are recorded in a risk register
    ▪ Useful for monitoring purposes
    ▪ Examples of data which may be included in a cash register:
    1. Risk number (a unique identifier)
    2. Risk category (low, medium, high)
    3. Description of risk
    4. Date risk identified
    5. Name of person who identified risk
    6. Likelihood
    7. Consequences
    8. A monetary value, if such can be allocated to the risk
    9. Interdependencies with other risks
    RISK REPORTING

    ▪ the provision of information to management and the


    Board that will explain the method of risk management,
    and how risks are identified and assessed
    ▪ The risk register will contain all the risks, and only the
    high risks are reported to management and Board
    ▪ In reporting, you should be able to present both the
    GROSS RISK and the NET RISK to demonstrate the
    COST EFFECTIVENESS of those controls

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