Risk Management Module 5

RISK MANAGEMENT
President Ramon Magsaysay State University

(Formerly Ramon Magsaysay Technological University)
College of Accountancy and Business Administration
Iba, Zambales, Philippines
Tel/Fax No.: (047) 811-1683
College/Department College of Accountancy and Business Administration

Course Code Major Elec 2
Course Title RISK MANAGEMENT
Place of the Course in the
Major Subject
Program
Semester & Academic
First Semester AY 2021-2022
Year
Author JOHN REY MERCURIO
Chapter 5
RISK STRATEGY
Discussion
Risk Architecture, strategy and protocol

The risk architecture, strategy and protocols create the risk framework that
supports the risk management process. British Standard BS 31100 provides notes
on the risk management framework that state that it should include the objectives,
mandate and commitment to manage risk (strategy), and the organizational
arrangements that include plans, relationships, accountabilities, resources,
processes and activities (architecture), and that the framework should be embedded
within the organization’s overall strategic and operational policies and practices
(protocols).
Risk Management Policy
The risk management policy should facilitate successful implementation of
risk management in the organization. The policy should confirm the protocols for
JOHNREYMERCURIO 1
RISK MANAGEMENT
undertaking the activities, as set out in the risk guidelines for the organization. The
risk guidelines may be produced as a separate set of documents, so that they can be
more easily updated.
The risk management policy should set out the strategy that the organization
is seeking to achieve with respect to risk management, together with the systems
and procedures that will be put in place to monitor performance, as well as the
means for reporting and communicating on risk management. It will, in effect,
define the context within which risk management activities take place.
Risk Management Protocol
The risk management policy will set out responsibilities for risk as well as
the arrangements for implementing the policy. Risk management protocols will be
set out in a series of risk guidelines and these are described in a later chapter.
Procedures and protocols for undertaking the assessment of risks to strategy,
projects and operations will need to be established in writing. The organization will
also need to produce guidance on the frequency and nature of risk reports and who
is responsible for compiling the information.
The risk guidelines provide more information on how the risk protocols should be
interpreted and how they should be delivered. The detailed risk guidelines will set
out:
 risk assessment procedures;
 risk control objectives;
 risk resourcing arrangements;
 reaction planning requirements;
 risk assurance systems.
JOHNREYMERCURIO 2
RISK MANAGEMENT
Risk Management Architecture

The risk management structure of an organization can be described as the
risk architecture. The risk architecture sets out lines of communication for
reporting on risk management issues and events. It is vital that the risk architecture
reinforces the fact that the responsibility for managing risks remains with the
owner of that risk. So that risk management can be fully embedded into the
processes and operations of an organization, a clear statement of risk management
responsibilities is required.
The risk architecture can be represented diagrammatically as a means of
identifying the committees with risk management responsibilities and the
relationships between those committees. The importance of the risk architecture of
an organization will be discussed later in this Part and examples of typical risk
architectures will be provided.
Risk Management Strategy
It is important for an organization to have a clearly establish strategy in
relation to risk management. The strategy needs to be based on the overall
approach of the organization to risk and risk management. An important
component of that risk strategy will be the arrangements for ensuring risk
management input into strategy, projects and operations.
RISK MANAGEMENT RESPONSIBILITIES

Allocation of responsibilities
Everybody working for the organization will need to be made aware of their
risk management responsibilities, as well contractors and suppliers. There are
many professional people in large organizations who understand risk and a
substantial contribution to make to the successful management of the priority
JOHNREYMERCURIO 3
RISK MANAGEMENT
significant risks. Unfortunately, there is not always a common view of risk

management or the issues that are important to the organization.
A detailed set of responsibilities will ensure that the roles of risk owners,
process owners, internal audit, risk manager, specialist risk management functions,
members of staff, contractors and outsourced operations as well as all others are
clearly defined and understood. Information on ownership of each priority
significant risk should be included in the risk register. It is important that the
activities of the risk manager, risk management committee, audit committee,
internal auditors and others do not reduce local ownership of significant risks.
Managers must see ownership of risks as integral to the management of core
processes and business activities, not as a separate issue that is the responsibility of
specialist professional risk management and/or internal audit practitioners.
STATUTORY RESPONSIBILITIES OF MANAGEMENT

There has been a developing trend in many countries towards ensuring greater
clarity in regard to the obligations of company directors. The general duties of
directors have developed in the common law over many years in most countries.
Usually, board directors will be either executive directors or non-executive
directors of the organization. In certain organizations, such as charities and most
government departments, executive directors will meet separately as an ‘executive
committee’ and the non-executive directors will form a ‘board of governors’.
Typically, executive directors will be full-time employees of the organization with
a specific area of responsibility.
Non-executive directors have an important role to play in risk management
within the organization. However, this role will normally be restricted to audit,
assurance and compliance activities. It may be inappropriate for non-executive
JOHNREYMERCURIO 4
RISK MANAGEMENT
directors to become involved in the management of the individual risks, because of

the conflict with non-executive audit responsibilities and because executive
directors are in a better position to understand and deal with the risks that the
organization faces.
Role of the Risk Manager
Historically, the risk manager has been involved in assessing overall risk
policy with endorsement from the board. Decisions on insurance risk management
issues and the provision of statistical analysis of insurance losses have been part of
these historical responsibilities. The insurance risk manager needs to evaluate the
current status of risk management and reflect on the current state of the insurance
market. Increases in insurance rates and a more sophisticated approach to risk
financing have affected the amount of insurance purchased by large organizations.
In many cases, there has been less insurance purchased and this has led to a
reduced premium spend and a lower budget for the insurance risk management
department.
JOHNREYMERCURIO 5

Risk Management Module 5

Uploaded by

Copyright:

Available Formats

Risk Management Module 5

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Risk Management Module 5

Uploaded by

Copyright:

Available Formats

RISK MANAGEMENT

President Ramon Magsaysay State University

College/Department College of Accountancy and Business Administration

Risk Architecture, strategy and protocol

Risk Management Architecture

RISK MANAGEMENT RESPONSIBILITIES

significant risks. Unfortunately, there is not always a common view of risk

STATUTORY RESPONSIBILITIES OF MANAGEMENT

directors to become involved in the management of the individual risks, because of

You might also like