A strategic risk assessment involves identifying, understanding, and ranking the risks that are most consequential to the organization’s ability to execute its strategy and achieve its business objectives. Performing a strategic risk assessmentwill produce the information needed to begin developing your risk management plan. It is also a best practice to establish an executive-level risk committee or working group to assist the appointed risk leader in driving risk management initiatives. Ideally, this risk advocate is already an embedded key player in the organization’s strategic planning process. A best practice is to identify an executive or Board member who will help drive ERM initiatives. Set a formal agenda item with senior leadership to discuss the role that risk management will play in the organization, as well as goals and expectations for the ERM program. Set a formal agenda item to discuss ERM strategies, objectives, and expectations. Provide examples of mature risk management practices.ģ.Communicate the importance of embedding ERM into strategy.Establish the objective of the risk management plan is to help the organization execute its strategy and achieve its objectives.During education and discussion sessions, the risk management team should aim to: In order to solicit management’s and the Board’s required involvement in ERM planning, the risk function must proactively educate leadership regarding the importance of strategic risk management. However, the responsibility to engage management and the Board in ERM discussions lies with the audit, risk, and compliance professionals leading the organization’s risk management efforts. Management, with input from the Board, is responsible for identifying, managing, and monitoring strategic risks. The Board is responsible for putting pressure on the CEO to identify those risks inherent in the business’s strategy, in addition to monitoring the organization’s risk culture. For this reason, risk management planning requires the involvement of the Board and management. Conduct risk management planning education and discussion sessions.ĮRM is not a separate activity with its own objectives, but an integral part of the organization’s strategy setting and performance processes. The Open Compliance and Ethics Group’s Red BookĢ.The IIA’s International Professional Practices Framework (IPPF).Some examples of risk management frameworks commonly employed by audit, risk, and compliance professionals include: Whether your risk management effort sits with the audit, risk, or compliance team, it is important for all involved parties to familiarize with ERM guidance documents widely available to the industry. Familiarize with risk management framework examples and guidance. The following is a step-by-step guide for audit, risk, and compliance professionals to build an enterprise risk management plan that can evolve and mature with the organization. Evolving cybersecurity threats, political, social, and economic fluctuation, and external risk events, including the 2008 global financial crisis and the 2020 COVID-19 pandemic crisis, point to the need for mature ERM practices to help the organization manage its response to strategic risks - the risk exposures that are most consequential to the organization’s ability to execute strategy and achieve its objectives.īuilding a strategic risk management plan requires thorough preparation and involvement from management and the Board. Today, risks are growing in complexity and volume, rendering the need for ERM more important than ever. The framework defines enterprise risk management (ERM) as the “culture, capabilities, and practices, integrated with strategy-setting and performance, that organizations rely on to manage risk in creating, preserving, and realizing value.” In 2017, COSO published “ Enterprise Risk Management Framework: Integrating with Strategy and Performance,” an updated framework for audit, risk, and compliance professionals to leverage in developing their risk management plans.
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