Category: Contemporary risk management
We will publish new book: Modern Risk Management Perspectives and Concepts (part III)
Twenty (20) components of the 1st comparative RM standards for listed and unlisted companies
Next, not only we suggest to implement a RM form in Appendix for the above 20 elements of RM quality standards, but we also continue to propose 10 principles of a so-called good risk management system which can be used in most of companies, from small to medium to big size, esp. in developing countries including Vietnam as following:
Principle 1 – The company needs to evaluate RM from opportunity approach and based on risk-return trade-off.
Principle 2 – For project risk management, it is necessary to conduct SWOT analysis
Principle 3 – The company need to think of risk management strategy in the interaction with other business functions.
Principle 4 – RM standards are intended to be incorporated in to implementation forms that companies need to apply
Principle 5 – The company ensures both costs and benefits of RM analyzed fully.
Principle 6 – It may necessary for companies to develop Risk MIS system for better risk reporting
Principle 7 – The corporation understands RM importance and allocates more roles for accounting managers with risk activities/functions that added values
Principle 8 – The internal control system, management accounting need to go with RM functions and provide reports to support decision making
Principle 9 – Corporation needs to consider using PDCA cycle of Deming in risk management analysis
Principle 10 – Corporate management pay attention to construct quantitative model of risk and measurement of macro impacts on various kinds of risks: market risk , credit risk, liquidity risk, exchange rate risk, etc.
(Source: made by main author)
We published a new book: Contemporary risk management After Gobal Economic Crisis (part I)
Twenty (20) components of the 1st comparative RM standards for listed and unlisted companies
Next, not only we suggest to implement a RM form in Appendix for the above 20 elements of RM quality standards, but we also continue to propose 20 principles of a so-called good risk management system which can be used in most of companies, esp. in developing countries including Vietnam as following:
Principle 1 – The company needs to define clearly responsibilities and risk reporting lines for the assigned personnel (maybe a CRO) or RM division, with implementation forms suggested.
Principle 2 – The corporation, as a whole, and CEO as well as Board need to understand RM culture in establishing business strategies and daily business operation.
Principle 3 – A disclosure policy need to disclose RM system in a corporate governance structure
Principle 4 – RM standards not only be consistent with the applicable laws and standards, but also business practice, and ISO standards
Principle 5 – The company ensures CRO qualifications and explain how they meet the rising business demand
Principle 6 – RM reports need to identify, measure and evaluate risk and analyze causes from internal or external environment in order to propose RM policies.
Principle 7 – The corporation understands it is important to establish suitable channels and communication to gather opinions and resolve complaints from stakeholders
Principle 8 – The internal control system should be implemented with proper policies and limits of authority by Board of Directors;
Principle 9 – Corporation needs to respect RM reports not only from internal audit but also from external audits.
Principle 10 – Corporate management needs to ensure financial statement quality and transparency and facilitate effective cooperation between financial and accounting functions or divisions.
Principle 11 – Corporate management needs to ensure RM functions responding properly to needs of internal and external stakeholders, community and environment.
Principle 12 – Risk management culture need to be understood and faciliatetd by CEO and Board.
Principle 13 – Board and management understand that building a financial risk management (FRM) and enterprise risk management (ERM) and risk models is important for business operation
Principle 14 – Depending on business situation, 3 or 4 lines of risk defense are needed to build.
Principle 15 – Clear duties and roles as well as effective co-ordination among RM, internal control, internal audit, compliance and external audit are necessary.
Principle 16 – CEO and Board maintains good communication with Management, investors and stakeholders, while departments keep effective dialogues with clients.
Principle 17 – Board and mangement are in charge of efficient meetings relating to RM.
Principle 18 – Corporation ensures a Good Corporate Governance system which involves interests of not just shareholders but also include employees, customers, suppliers, the environment, and government agencies.
Principle 19 – CEO, Board and Management contribute to build RM culture and reduce risks of low productivity from group conflicts within organization;
Principle 20 – Internal and External Audit functions need to ensure reliability and transparency of financial and accounting reports.
(Source: made by main author)
We just published new book: Risk Management Perspectives In Corporate Governance (part II)
Proposed Twenty (20) Principles of RM and 20 RM quality standards
Next, not only we suggest to implement a RM form in Appendix for the above 20 elements of RM quality standards, but we also continue to propose 20 principles of a so-called good risk management system which can be used in most of companies, from small to medium to big size, esp. in developing countries including Vietnam as following:
Principle 1 – The company needs to ensure controlling environment with management and supervisor participation to set up regulation for RM and financial accounting control, scope of management committees, and external oversight degree.
Principle 2 – For project risk management, risk identification need to be done in milestones development stages as well as at the beginning phase.
Principle 3 – The company need to develop risk responses after economic recession caused by trade war and social risks such as Covid 19, etc.
Principle 4 – RM standards are intended to be an effective tool to support strong corporate governance as well as Quality management system ISO 9001.
Principle 5 – The company ensures strong corporate governance structure because it has positive correlation with effective risk management system.
Principle 6 – RM reports need to be connected with good ERP system and effective management information system.
Principle 7 – The corporation understands it is important to build good infrastructure and information security to avoid and mitigate IT risks
Principle 8 – The internal control system should be coordinated with RM function to analyze risks both from internal and external environments.
Principle 9 – Corporation needs to use and apply good models such as PDCA or DMAIC or combination of SWOT and 7S into business operation, management and esp. Risk management functions.
Principle 10 – Corporate management pay attention to environmental and social risks for CSR and sustainable development
Principle 11 – Corporate management needs to use financial specialists and experts to combine due-diligence and options valuing in business and investment decision making.
Principle 12 – Risk management culture need to be understood and implemented properly and rationally by CEO, Board and management.
Principle 13 – Board and management understand it is necessary to perform risk analysis for each level of strategy and use scenario analysis of RM fitting to firm strategies.
Principle 14 – Depending on business situation,the firm may decide proper form of monitoring risks, either continuous monitoring or separate evaluating.
Principle 15 – The firm set up clear duties and roles separated with proper and limit of authorization of transactions and activities.
Principle 16 – CEO and Board might consider to issue Risk appetite statement or group risk statement to direct RM activities and control.
Principle 17 – Board and management understand the crucial role of risk prevention program and activities just like risk control activities.
Principle 18 – Corporation ensure an cooperative and RM culture, as well as promote a consulting culture among colleagues, management and supervisors.
Principle 19 – CEO, Board and Management direct RM, internal control and audit to control risk in each sector or industry, or group of customers, with their own risk limit and expected return.
Principle 20 – Depending on firm size, the firm will prepare certain budget for RM and set up effective channels of communication, monitoring and review of risk policies
(Source: made by main author)