Risk Management is More Than Preventing Risks

Indeed, the demand for corporate governance is growing. Experts identify two relationships between risk management and corporate governance. For these two, the first relationship, by far the most important, is the relationship between information and monitoring, where managers are required to provide up-to-date and relevant information to the company.

The most significant risks facing the company is the effectiveness of the risk management processes once the uncertainties (risks) are revealed. Cane Bay Partners can ensure your company is ready to move forward.

Risk management is more than preventing risks

Risk management appropriates the three objectives (optimization and efficiency of operations, quality of financial information, compliance with regulations) and the five components of internal control (control environment, risk assessment, control activities, information and communication, steering), which is complemented by another objective (strategy) and three other elements of the risk management system (goal setting, event identification and risk treatment). Risk management being an extension of internal management is a significant component of the corporate governance system.

Improving risk management

The owner proposes to senior management an incentive aimed at encouraging them to act in the best interests of the shareholders. It is the board of directors that determines the level of executive compensation based on the risk that the executive is expected to contain or reduce. The owner also has the power to dismiss any plans.

For better management, an effective enterprise-wide risk management process should be carefully developed, monitored and revised on an ongoing basis. It is said that risk management is part of the obligations of corporate governance, even though the main reports on corporate governance do not contain recommendations on risk control. However, in the United States, laws allow for the creation of audit committees to take responsibility for accounting risks.

The creation of specialized committees is a response to the requirements of corporate governance to deal with accounting and financial risks, the risks of over-compensation, and those caused by the nomination. Indeed, boards are expected to have a good understanding of effective risk management to reassure all stakeholders. To learn more, contact Cane Bay or speak with a risk management specialist today.