Corporate Risk Management (VUCA)

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Corporate risk management refers to all of the methods that a company uses to minimize financial losses and serves to optimize risk. Risk managers, executives, line managers and middle managers, as well as all employees, perform practices to prevent loss exposure through internal controls of people and technologies. A large corporation, such as a publicly-traded or employee-owned firm, has thousands, or even millions, of shareholders. Corporate risk management protects the investment of shareholders through specific measures to control risk. Risk management also relates to external threats to a corporation, such as the fluctuations in the financial market that affect its financial assets. Corporations’ risk approach often starts off by understanding…show more content…
The leading enterprises are considering risk management within a broader framework that is implied by regulatory considerations, realignment of its organizational strategy through an evaluation of the risks to pre-empt the issues before they occur. Companies’ risk responses include avoidance, reduction, transfer and retention. In relation to the externalities and disruptive nature of VUCA, these risk responses call for greater contingency planning and collaboration with external stakeholders. For example, responding to terrorism threats usually entail multi-agency…show more content…
It is ever changing. Indeed, change is the only certainty. Therefore, is the risk management appropriate for the VUCA context faced by the company? Put differently, is it fit for purpose? Sound stewardship requires the stewards to establish robust management practices, and having a sound system of risk management is no exception. Nevertheless, the question remains as to whether or not there are weaknesses and blind spots in existing practices. In this respect, a pillar of robust corporate governance is assurance, that is, having an independent eye that reviews whether risk management is VUCA-ready, design-effective, and operationally-effective. In today’s environment, those charged with governance face a higher degree of oversight for the system of risk management. An independent, objective assurance (example, internal audit) serves to inspire confidence in key stakeholders that the system is fit for purpose in the creation and preservation of corporate values. More importantly, the openness to having an independent review goes a long way in conveying that the board and management take the threat of VUCA seriously – both in word and in the spirit of corporate governance
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