LECTURE six: ENTERPRISE-WISE RISK MANAGEMENT (" ERM”) AND AUDITING
by Hamza Benidir (6405151)
Jesse Dunn (6349846)
Brenda Lim (6408283)
to Professor Chris Liboiron
for the course
(ADM 4341 B)
University of Ottawa
Nov 4, 2014
TABLE OF CONTENTS
1 . Enterprise-Wide Risikomanagement: A Comprehensive Definition3 a. What is Enterprise-Wide Risikomanagement? 3
b. ERM Criteria4
c. Aims of ERM5
2 . Practical Application of ERM6
a. Considerations in Adopting a great ERM Framework6
b. ERM Frameworks: RUEDO and RIMS6
m. Standard ERM Process8
e. Benefits of ERM Systems9
3. Stakeholders' Responsibilities in terms of ERM9
a. Corporate Governance's Responsibilities regarding ERM9 b. Management's Tasks with Regards to ERM11
c. Internal Auditor's Responsibilities with Regards to ERM11 deb. External Auditor's Responsibilities in terms of ERM12 some. ERM, At this point and In the Future13
a. Current Condition of ERM13
m. Future Viewpoints on ERM14
Circumstance 1 . 14, New Century Financial Firm 16
1 ) Case Overview16
2 . The Suspects: Exactly where Did That they Fail? 18
The global economic recession of 2008 (or the fantastic Recession) features mainly been a subject disregarded from class discussion:
Major has been for the rulings prior to (and stemming from) the Sarbanes-Oxley Action of 2002 (" SOX”) The tales depicted in the First Securities Company of Chicago and Fred Demanding & Organization, Inc. situations highlighted some of the initial restrictions of the Investments Act of 1933 plus the Securities Exchange Act of 1934 Enron and WorldCom were among the list of cases that ultimately motivated federal government bodies adopt a sweeping pair of new requirements in SOX.
Ironically, SOX was proclaimed the most important pair of accounting-related policies to be integrated since the Investments Act of 1933 plus the Securities Exchange Act of 1934; but, both of individuals policies were adopted being a response to the Great Depression of 1929. It appears that the most significant economic recession since the Great Depression, the truly amazing Recession, value more focus.
As it was discussed in Spiel 6:
Primary amongst the factors behind the Great Economic depression of 2008 was the collapse of the subprime mortgage sector Lehman Siblings, Inc., between several others, was main American worn to land As one of America's largest banks at the time, Lehman Brothers, Incorporation. stole most of the spotlight away from the millions of different smaller stakeholders who, no less naïve than Lehman Brothers, Inc., droped victim for the collapse If the music finally stopped and the world over was left possessing the handbag, one problem primed all others: how could lots of people have failed to see next? If only corporations had a device in place pertaining to foreseeing and protecting against these kinds of risks.
ENTERPRISE-WIDE RISK MANAGEMENT: A THOROUGH DEFINITION
What is Enterprise-Wide Risk Management?
COSO and RIMS, specialist authorities actively involved in building comprehensive enterprise-wide risk management frameworks and criteria, define enterprise-wide risk management (" ERM”) as follows:
ERM is actually a strategic organization discipline – implemented simply by an organization's governance, it is management staff, and its different personnel – that helps the success of the company objectives by addressing the total spectrum of its risks and handling the merged impact of the people risks since an interrelated risk collection (COSO two, 2004) (Risk Management Contemporary society, 2014).
In other words, ERM can be described as:
A company-wide way, used to identify, assess, manage, and control risks present at all degrees of an organization (Caldwell, 2012) ERM may also be identified as a risk-based approach to managing...
A company-wide approach, accustomed to identify, assess, manage, and control dangers present in any way levels of an organization (Caldwell, 2012)
ERM are often described as a risk-based method to managing an enterprise that integrates ideal planning, operations management, and internal control (Caldwell, 2012).
Traditionally, businesses are exposed to similar risks, which includes credit risk, physical security, loss elimination, fraud prevention, information protection, information reliability, business continuity, safety, complying and examine (Brandel and Slater, 2013).
Transferring risk (by means of insurance policies, to get instance); and/or
Accepting risk (which varies from neglecting risk, in that the organization appreciates the presence of the risk) (Brandel and Slater, 2013).
5. Aggregates metrics: an ERM system must aggregate it is metrics (Segal, 2011).