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Activity Two

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Karen Alcantara
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24 views

Activity Two

Uploaded by

Karen Alcantara
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Karen M.

Alcantara
4th year BSBA
Activity 2
Individual risk occurrences and overall risk can be understood and managed through the
process of risk analysis and management, which maximizes success by minimizing threats and
maximizing opportunities and results.

Steps in Risk Management are:


Step 1: Identification of context
Step 2: Risks Identification
Step 3: Risk assessment and prioritization
Step 4: Risk response
Step 5: Risk monitoring
Authorities and Responsibilities of management positions related to risk management:

 Board of Directors- Monitoring and evaluating to ensure that these documents are in
place and effective.
 Management - Executive Directors: Executive Directors are in charge of planning and
carrying out all risk management procedures in accordance with the given regulations
and practices.
 Internal Audit: being responsible for giving independent and objective assurance and
consulting on this activity to help it achieve the set objectives.

Risk
 Most businesses now consider risk management to be essential. However, even within
the same industry, organizations can have diverse structures for risk management. What
then is risk? The term "risk" has come to be used in the business world to refer to
anything that prevents an organization from achieving its goals. Risk is defined by the
Oxford Dictionary as "Exposure to the prospect of loss, harm, or other undesirable or
unwelcome circumstance; a chance or situation involving such a possibility."
 While there is some risk in every business, organizations and entrepreneurs must be
willing to take risks because there can be no significant return without them.

Classification of Risks
 Systemic Risk

 It is not fully uncontrollable by an organisation.


 It is not entirely predictable.
 It is usually of a macro nature.
 It usually affects a large number of organisations operating under a similar stream.
 It cannot be fully assessed and anticipated in advance in terms of timing and gravity.
 The example of such type of risks is Interest Rate Risk, Market Risk, Purchasing Power
Risk.

 Unsystemic Risk

 It is usually controllable by an organisation.


 It is reasonably predictable.
 it is normally micro in nature.
 If not managed it directly affects the individual organisation first.
 It can be usually assessed well in advance with reasonable efforts and risk mitigation
can be planned with proper understanding and risk assessment techniques.
 The examples of such risk are Compliance risk, Credit Risk, Operational Risk.

Risk categories based on their effects on finance


Additionally, the hazards could be roughly divided into Financial Risk and Non-Financial Risk. Although
these are not necessarily mutually exclusive, it is nevertheless beneficial to comprehend the
fundamental classification. In each circumstance, there are usually risks that need to be handled and
acknowledged that are both financial and non-financial.

Financial risk
The entity is treated for the risk that has some direct financial impact as an economic risk. Market risk,
Credit risk, Liquidity risk, Operational Risk, Legal Risk and Country Risk.

Non-Financial Risk
This type of risks do not usually have direct and immediate financial impact on the business, but the
consequences are very serious and later do have significant financial impact if these risks are not
controlled at the initial stage. This type of risk may include, Business/Industry & Service Risk, Strategic
Risk, Compliance Risk, Industry Fraud Risk, Reputation Risk, Transaction risk, Disaster Risk.
Advantages of RISK MANAGEMENT
Strategic planning requires effective risk management. It contributes significantly to project
management. A good risk management strategy focuses on recognizing estimating potential
dangers.
Some of the key advantages of having risk management are as under:
 Risk Management in the long run always results in significant cost savings and prevents
wastage of time and effort in firefighting. It develops robust contingency planning.
 It can help plan and prepare for the opportunities that unravel during the course of a
project or business.
 Risk Management improves strategic and business planning. It reduces costs by limiting
legal action or preventing breakages.
 It establishes improved reliability among the stake holders leading to an enhanced
reputation.
 Sound Risk Management practices reassure key stakeholders throughout the
organization.
STEPS IN RISK MANAGEMENT PROCESS
The process of risk management consists of the following logical and sequential steps:

Risk Identification Risk Analysis Risk Assessment Handling of Risks

Risk management for fraud


Fraud is the intentional deception of another person with the goal of obtaining something. A
broad definition of fraud is "any conduct by which one... someone wants to obtain an unfair
advantage over someone else. In other words, fraud is any action or inaction that is meant to
benefit one person at the expense of another and unfair loss to the other, whether through
falsification of information or another method.

Reporting of fraud under Companies Act 2013


The Companies Act, 2013 has introduced many new reporting requirements for the statutory
auditors of companies. One of these requirements is given under the Section 143(12) of the
Companies Act, 2013 which requires the statutory auditors or cost accountant or company
secretary in practice to report to the Central Government about the fraud/suspected fraud
committed against the company by the officers or employees of the company.

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