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Risk Management Slides - Part 3

This document outlines the key learning outcomes and concepts around risk management and governance that will be covered in Learning Unit 2. It discusses risk management processes like identifying risks, assessing and evaluating risks, different risk responses, and monitoring risks. It also addresses risk documentation through a risk register, responsibilities for risk management, residual risk, and the consequences of an ineffective risk management system.

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nhloniphointelligence
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59 views

Risk Management Slides - Part 3

This document outlines the key learning outcomes and concepts around risk management and governance that will be covered in Learning Unit 2. It discusses risk management processes like identifying risks, assessing and evaluating risks, different risk responses, and monitoring risks. It also addresses risk documentation through a risk register, responsibilities for risk management, residual risk, and the consequences of an ineffective risk management system.

Uploaded by

nhloniphointelligence
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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LEARNING UNIT 2 – PART I

RISK MANAGEMENT AND GOVERNANCE

Copy Right Reserved © University of the Free State 2024 1


LEARNING OUTCOMES:
After completing this learning unit, students should be able to:
 Explain the concept of risk within a business or an organisation (business risk).
 Identify and explain the different types of risks (internal and external risks).
 Explain the risk management process.
 Explain key concepts/components of the risk management process.
 Explain how risks can be identified.
 Explain how risks are assessed and evaluated briefly.
 Identify and explain the different types of risk responses.
 Explain the implications of ineffective risk management (consequences).
 Explain who is responsible for the risk management process.
 Explain the monitoring, documentation and reporting of risks within a business or
organisation.
LU2: Study Guide, Page 5 Copy Right Reserved © University of the Free State 2024 2
RESIDUAL RISK:
• Residual risk is the risks that remains after taking into consideration the
effectiveness of the entity’s response to risk.
• Risk response might not eliminate the risk but reduce the likelihood of
occurring and/or impact thereof if it occurs.
• Consider whether the remaining risk is acceptable or not.
• Depends on the risk appetite and tolerance levels.
• Example: Risk of Theft

LU2: Study Guide, Page 18 Copy Right Reserved © University of the Free State 2024 22
RESPONSIBILITY FOR RISK
M A N A G E M E N T:

• The board of directors (those charged with governance) is ultimately


responsible for risk management.
• Assisted by board committees (Risk Committee and Audit Committee)
• Internal audit function evaluates the effectiveness of the risk
management process (design and implementation).
• In line with the recommended practices of the King IV Code on
corporate governance.

LU2: Study Guide, Page 19 Copy Right Reserved © University of the Free State 2024 23
R I S K D O C U M E N TAT I O N :
• Business risks should be documented in a Risk Register:
• Internal document that is not published
• There will be separate risk registers for each area of the business
• It is a managerial control because it records the risks, the controls
(response to risk) and the persons responsible for managing the risk
• It is a document that will be reviewed by management and by the
Audit Committee and Risk Committee to ensure there is a policy of
risk management in place

LU2: Study Guide, Page 19, 21 Copy Right Reserved © University of the Free State 2024 24
R I S K D O C U M E N TAT I O N :
• Key aspects should be documented in the risk register:
• Business risks identified
• Likelihood and impact
• Ranking / prioritizing
• Response to risks identified
• Responsibility

• See the next slide for an example of a risk register.

LU2: Study Guide, Page 19, 21 Copy Right Reserved © University of the Free State 2024 25
Risk Register example Copy Right Reserved © University of the Free State 2024 26
CONSEQUENCE OF AN INEFFECTIVE
RISKS MANAGEMENT SYSTEM:
• An effective risk management system: Proactively anticipate future adverse or positive
events that result in predictable outcomes.
• Consequences of not implementing an effective system:

Not identify all Incorrect evaluation Ineffectively respond


business risks of business risks to business risks

LU2: Study Guide, Page 22 Copy Right Reserved © University of the Free State 2024 27
ANY
QUESTIONS?

Copy Right Reserved © University of the Free State 2024 29

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