Risk Management

Seminar 1.1: Introduction to Risk Management

Seminar 1.1: Introduction to Risk Management

Enterprise Risk Management Premise Every entity exists to provide value for its stakeholders All entities face uncertainty, and the challenge for management is to determine how much uncertainty to accept as it strives to grow stakeholder value Uncertainty presents both risk and opportunity, with potential to erode or enhance value ERM allows management to effectively deal with uncertainty and associated risk & opportunity, enhancing the capacity to build value Value is maximised when management sets strategy and objectives to strike an optimal balance between growth and return goals and related risks, and efficiently and effectively deploys resources in pursuit of the entity’s objectives Aligning risk appetite and strategy o Consider risk appetite in evaluating strategic alternatives, setting related objectives, and developing mechanisms to manage related risks Enhancing risk response decisions o Providing rigour to identify and select among alternative risk responses—risk avoidance, reduction, sharing and acceptance Reducing operational surprises and losses o Entities gain enhanced capability to identify potential events and establish responses, reducing surprises and associated costs or losses Identifying and managing multiple and cross-enterprise risks o Facilitates effective response to the interrelated impacts (of the myriad of risks affecting different parts of the organisation), and integrated responses to multiple risks Seizing opportunities o Considering a full range of potential events and identifying and proactively realising opportunities Improving deployment of capital o Obtaining robust risk information, allowing management to effectively assess overall capital needs and enhance capital allocation

ERM encompasses: -

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These capabilities inherent in enterprise risk management help management achieve the entity’s performance and...