Implementing Corporate Governance in the Context of Enterprise Risk Management

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Corporate Governance in Risk Management

Internal control

In any company the owners have set goals as well as objective to be met which are only achievable with the hiring of employees The hire workforce is the source of thefts , non-compliance to the set laws as well as the regulations of the company , poor resource use , and inconsistent financial reports . Ironically the owners or the shareholders of the company can not work without these workforce and therefore the risk exists as long as

the company hires the employees The owners or the shareholders shield to this losses is a set of goals as well as objectives to the employees with a clear definition of the expected target , explicit definition of tasks , quantify risk , set policies ,asses progress and initiate the necessary corrective actions (Dimitris , N 2005

The director as well as the managers of companies are therefore duty bound to take measures aimed at minimizing risks , a concept known as internal control . The actual risk , the frequency of the occurrence of the risk and the potential cost associated with the risk should be identified as a matter of priority . This is followed by a comparison to the associated with the control of the risk (James , L 2003

Internal controls have an absolute goal of protecting investments as well as optimizing the returns of the organization through internal control the organization operation are assured to a certain level as far as the attainment of the set goals and objectives is concerned hence the company achieves an efficient as well as effective course of operations The financial reports are therefore given in a reliable as well as truthful manner and ideally the entire organization is able to abide ti the rules as well as the regulations responsible for governing the organizations actions . However it is important to note that there exists no absolute assurance guaranteed by internal control despite how effective it may be carried out , but rather even the best implemented internal control can only yield to a certain level of assurance . Once internal control is applied effectively it enables the organization to be better placed to meet its intended goals as well as targets out of its operations ability to sensibly comply with the rules as well as the regulations in place and a reliable results of a financial reporting Lastly internal control is effective to all members of the organization and the members are at their own discrepancy to either strengthen it as well as undermine it (Harold , F ,T , Micki ,K 2004

Preventive controls

Events that are consequential to the occurrence of a risk or undesirable to a company can be avoided through the application of preventive control measures . These measures are most likely to be imperfect and consequently , they should be applied in conjunction with other types of control . An example of this is to complement preventive control with detective control in which case an error that might not have been prevented is...