Risk Management Issues
The Governance dimension of Enterprise Risk Management
The Copenhagen Charter approach and methodology is based on the ambition to restore the corporate reputation if there is a scandal or a failure: It seems that when most of the GRC offenses are intentionally violate because monitoring the established regulations and legal statutes - or just common-sense definitions of what is acceptable, appropriate and ethical are nor adhered to. Therefore the components of Risk Management should be back on the drawing board.
Example for business institutions-similar questions can be created for other trades and businesses to address the breakdown in risk governance. The following questions/dilemma are from a recent custom tailored in-house workshop.
- Should organizations push in-house products to investor clients against superior third-party products to earn kickbacks from product vendors?
- Is it ethical to sell products or services, financial instruments, securities etc. that you know will collapse in value, and then use your proprietary trading platform to speculate against them?
- Is it possible to invade segregated client accounts and borrow the money for your own operations?
- Is it permissible to redefine a bank's central exposure hedging platform as a profit center and circumvent established risk controls to generate additional earnings?
In the past regulations have been introduced in response to failing companies whose leadership placed a premium on chasing rapid growth strategies without implementing sufficient risk management controls. The Sarbanes Oxley Act (SOX) and The Dodd-Frank Act were the following regulations that puts additional burdens on companies of varied sizes and, therefore, on their board directors, particularly in the area of risk management.
Addressing the governance structure of risk management could significantly reduce if not eliminate the many risk missteps that force the oversight authorities to be extremely proactive. In the years leading up to the financial crisis, many firms muddled thru their risk management processes in an unstructured manner without ensuring the right expertise. Regulators, stakeholders and investors were unaware that companies, at the same time, were finding ways to circumvent or even marginalize their risk management organizations.
After the crisis it has come to light that similar breakdowns in risk management can occur at apparently some of the most risk-aware organizations. This revelation has alerted the regulators that raise red flags event when they encounter a minor GRC infringement.
During 2012, corporations paid $10.7 billion in fines for various misdeeds. However, individuals were not served with any indictments of criminal activities. Many believe that big influences on government regulators are still strong and that the "Too Big to Jail" code remained in effect.4. But for how long?
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If one of your key objectives is to develop a customised and integrated corporate structure of your enterprise risk management