Enterprise risk management

Risk management
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Course
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Enterprise risk management
Enterprise risk management refers to the mechanisms and the procedures that are applied by the financial institutions in the management of the risks and seizing up the opportunities that that do relate with the achievement of the institution’s objectives (Goldsmith et al, 2003; Williams and Green, 1997). It does therefore provide a basis for the management of the risks which do involve the identification of the particular situations that are vital to the institutional objectivity which in this case are risks and opportunities, it does asses them on the basis of potential occurrence and measure of its impact on the organization, response strategy determination and he laid structures in the monitoring of the progress. With proper identification and addressing of the identified risks and opportunities, the business enterprise is therefore in position to protect and create stakeholders values which encompasses the owners, customers, the employees, the society and the regulators (Babette et al, 2008).
Generally, enterprise risk management can be said to be a risk based strategy in the management of the any enterprise which integrates the internal control concepts, the Sarbanes-Oxley Act concepts and the concepts of strategic planning of an institution. It does address the needs of the various stakeholders that have the desire to know the risks facing them in a broader spectrum and work towards their appropriate management (Chapman, 2006).
Financial and operational risk management
Financial risk management refers to the management of the current liabilities and current assets of the company. The current assets of an institution include the cash and short-term funds, cash due from other financial institutions and treasury bills and government bonds. The current liabilities of the institution on the other hand are the deposits and current accounts and managed funds. The financial statements show there is a substantial increase in the deposit and current accounts. The amounts of this liability should be matched with higher investment in the current assets. It is not good for the company to take all the money to long-term capital projects or purchase of fixed assets. Many companies concentrate on their quarterly results and other market issues instead of proper working capital management (Williamson, 2003). It is important for the business to realise that the legal environment, the information systems and customers can severely affect the liquidity of the business ((Ahn et al., 2003).
Operational risk management refers to the risks that do arise as a result of the institution’s implementation of its businesses which includes the people working in the company, the systems and even the procedures through which the institution does its operations. In addition to this, other factors like the legal risks, physical or environmental risks and the fraud risks are also included. According to Basel regulations, it defines operational risk as the risk of the loss emanating from the failed internal procedures, the systems, the people and other external events ...