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Questions about risk management
Questions about risk management
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What is ERM? According to the definition of ERM from COSO, ERM is: • A process, ongoing and flowing through a company; • Every people at every level of an organization will affect ERM; • ERM is applied in strategy setting; • ERM is applied every level and unit across the company and consider the risk at entity level; • Identify the potential risks which affect the company and manage these risks within its risk appetite; • Has the ability to provide suitable assurance to the management and boards. Why WP should implement an ERM process and what are the benefits to WP’s stakeholder? Imply ERM in WP will provide the following benefits: 1. Unacceptable performance variability reduction: the profit provided by WP over last few years varies significantly from $0 to $1,000,000. ERM will provide assessing the possibility and consequence of events happened. Furthermore, ERM will prepare the solution to avoid these events happen or control the impact when they happen. Therefore, ERM can help WP to earn a more stable profit which will be a great benefit to Peace Family, other employees and related stakeholders 2. Align and integrating different views of risk management: ERM can provide a common framework to manage different kinds of risk. It can provide WP management and board a clear view of risks management. The clearer the management understand risks, the more stable WP can be. 3. Make the stakeholders and investment parties’ confidence: If WP implements ERM process, it will increase risk management capabilities. Investors, distributor, business partner and creators will feel confidence if WP has a well-managed risks framework. 4. Corporate governance enhancement: ERM can define the roles of risk management and responsibilities, impro... ... middle of paper ... ...hese events happen or minimize the negative impact when they happened. This will stabilize the distributable profit. 2. ERM framework can enhance the Board oversight by providing more accurate and up-to-date risk related information. This will allow the Board has enough information and time to make a correct business decision to smooth the distributable profit. 3. When the business environment changes which may affect the distributable profit, ERM will help the management team to make a quick and successful respond by a serious of analysis. Therefore, it can provide a good buffer for the distributable profit when business environment changes. 4. The ERM frame helps every people in WP to have a good sense of risk management from every level. A positive risk management environment will be established in WP. This business culture can help the Board to control the risk.
Ziff Davis, an American publisher and internet company, wrote a small document on the top 5 reasons ERP systems fail and how to fix those reasons. The document makes an interesting point of “failure is often a perception, rather than a quantifiable measure of outcomes (Ziff Davis 2),” meaning companies may think they have failed by their perception, when in actuality they didn’t proper measure their outcomes or potential outcomes. The first reason the document goes over is “setting unrealistic expectations at the outset. (3)” The document claims that a company is eager and excited to implement the system without fully defining business requirements and goals (3). This ties back with that perception and measurement dilemma. The company perceived everything was going to be well with the implementation, but failed to measure out goals and requirements. Ziff Davis goes into the fact that companies fail to realize “the level of resource commitment the project will take (5)” and that “Done properly ERP can and will transform your business by automating and re-engineering its beating heart: its business processes. (4)” Again these point out to that perception and measurement factor. Another reason the document goes over is “Not involving key stakeholders (6)”. Ziff...
When done correctly, Enterprise Risk Management, can be a transformative tool to help any organization improve their business performance. Managers and front line employees need to develop the ability to identify opportunities, roadblocks, or hazards that can destroy the organizations strategic goals.
By collected all the necessary resources we are be able to discuss more about ERP and the key factors in that in order to make the final conclusion for ERP. In the end the successful and unsuccessful are affected by several factors that explain in this essay.
The objectives of operation, reporting, and compliance are represented in the column. Components are represented by the rows regarding the ERM. The third dimension is the entity’s organizational structure. It demonstrates clear how and how counteract low risk tolerance and high risk appetite. Risk reduction is obtained by facilitating effective internal control with a broad scope that reflects changes in the framework to risk management with ERM. The framework requires adaptability which enables flexibility due to a overlap of functions of identify, assessing, and responding to risks within operations, reporting, and compliance. Activities, information, communication should be monitored, evaluated, and identified for response are part of the ERM for effective and efficient risk management. The concept of risk appetite and risk tolerance is introduced because the identification of potential events affecting achievement can be managed. Also, the process requires communication, consultation before and monitoring and review after every decision or action (McNally, 2015). The financial principles to risk management are effective risk management creates value, integration, decision making, address uncertainty, systematic structure, and facilitated continuous improvement. The financial principles form effective and efficient management within a firm. Financial principles help ERM with risk
The ERP system allows a strategic flow of information between all areas within an enterprise in a consistently productive manner.
The risk management process needs to be flexible. Given that, we operate in the challenging environment, the companies require the meaning for managing risk as well as continuous improvement in identifying new risks that will evolve and make allowances for those risks that are no longer existing.
Some include risks at the enterprise level, managing risks in complex projects and dealing with turnarounds and large capital projects. Liu, Zou, & Gong (2013) explore how enterprise risk management (ERM) may influence the ability and performance of project management risk (PRM) by considering the features of the construction industry, its businesses and projects. Managing risks within projects such as these has become an important process to achieve project objectives in terms of the scope, time and cost. The results show that enterprise risk management can positively influence the implementation of project risk management. This can be achieved through implementing a risk focused culture, setting up risk management departments and setting up risk procedures. This will help control the project risk and improve the performance of project risk management. Communicating the concerns with other team members can help identify the risks earlier on rather than later in the development of the project. If the Stakeholders and managers involved are satisfied then the project outline becomes a
... need for this one human interaction with the system is what makes it vulnerable to errors and redundancy and the need to get it right is paramount. So the production plan is created bases on the sales order and this is shared with purchasing so that any unavailable material can be ordered. This shows how the MRP links the production with purchasing as well as accounting. Using this information links and sharing properly in the ERP can result in significant cost savings because companies are beginning to see its SCM as part of a larger process than just customers and suppliers.
In an effort to effectively use the risk management process frameworks, it is important to differentiate between risk and uncertainty. There is a tendency to claim that the process of the COSO framework and SHAMPU framework are more appropriate to further explain and deal with the issues of uncertainty and risk.
e risk management process typically includes five steps. These steps are 1) identifying all significant risks, 2) evaluating the potential frequency and severity of losses, 3)developing and selecting methods chosen, 5) monitoring the performance and suitability of the risk management methods and strategies on an ongoing basis.
Risk mitigation is also the process of controlling actions, which are identified, and selecting the suitable ones to reduce risk according to project objectives (Pa, 2015). Risk mitigation is important in IT organizations in so many ways. According to Ahdieh, Hashemitaba, Ow (2012), mitigation of risk provides a mechanism for managers to handle risk effectively by providing the step wise execution of the risk handling (as cited in Pa, 2015, pg. 49). Some risks, once identified, can readily be eliminated or reduced. However, most risks are much more difficult to mitigate, particularly high-impact, low-probability risks. Therefore, risk mitigation and control need to be long-term efforts by IT project managers throughout the project lifecycle. There are three types of risk mitigation strategies that hold unique to Business Continuity and Disaster
Ultimately, a strong ERM program will allow the organization to manage risk successfully by instilling an ongoing process. The importance of enterprise risk management is to ensure that the program is not managed in individual departments, but rather utilizing a holistic approach. According to Fraser & Simkins, in the text, Enterprise Risk Management, the common result of a stove-pipe approach to risk management is that risks are often managed inconsistently these risk may be effectively managed within an individual business unit to acceptable levels, but the risk treatments or lack thereof selected by the manager may unknowingly create or add to risks for other units within the organization.
Risk management is a process used in all industries to reduce the risk. The Risk management tool usage changes from sector to sector and hence each sector has developed their own risk management tools and methodologies to mitigate the risk. But the concept remains the same behind all the tools (Ropel, 2011). The main steps for risk management irrespective of the sector are:
The purpose of risk management is to protect an organization’s valuable assets information, hardware, and software. The purpose of risk management process is to identify and manage risks in such a way that a company is able to meet its strategic and financial targets. Risk management is a continuous process, by which the major risks are identified, listed and assessed, the key persons in charge of risk management are appointed and risks are prioritized according to an assessment scale in order to compare the effects and mutual significance of risks. It is very important that the organizations and business to be very well prepared to see what kind of risk we are facing, or the business can suffer in case of a major disaster.
Risk Management allows us to identify the problems which are unknown during the start of the project but may occurs later. Implementing an efficient risk management plan will ensure the better outcome of the project in terms of cost and time.