The assessment and management of corporate risks add value to the shareholders and stakeholders.   Strategic, financial and operational risks undermine profitability, but assuming them has its rewards.   Managing the risks properly increase profit and improve the corporate image.

By Eugenio Micheletti.  Director of Emerging Staffing Brokers

Risk Management and Stakeholders confidence

Undoubtedly, the best way to give stakeholders certainty and transparency is to monitor strategic, financial and operational risks associated with the business.

The aim is to detect, analyze the likelihood and the financial impact of deviations.   This allows us to prioritize enterprise risks.   Then we have to define action plans with deadlines and select the people in charge of it.

The first step requires the Board and Senior Management to define its risk apetite, with the commitment to allocate the resources needed for the project.

Counting with this support of the Board, the Project can be developed following these steps:

1. Corporate Governance:

• Standards, policies relating best practices
• Code of conducts
• Compliance with law and regulations
• Management Letter related internal control environment and financial reports.

1. Profiles, goals and remuneration policies for each stakeholder

• Responsibilities and rights of the shareholders
• Commitment and responsibilities of the Board to control the operations
• Fiduciary duties to the Senior Management
• Incentives to the Senior Management, which not only lead to short terms results, but also long-term achievements

Risk Management and Profitability

Is each payroll being invoiced to the clients?; is the company complying all the regulations?; is the company having financial reports on time?; who approves new clients´ commercial conditions?; how does the company define credit limit to the clients?

The company needs clear procedures and periodic key controls in place.

This monitoring is crucial for the company to obtain profit avoiding the negative impact of the contingencies.

How will the company achieve this goal?   We can mention the following steps:

1. A monitoring methodology and continuous improvement to achieve efficiency:

Even if the company doesn’t have a Risk Management Department, this function has to be allocated in any department as Reporting, Accountant, Internal Control, Internal Audit or other, to monitor periodic testing.   A specific procedure has to be implemented, and documentation of testing kept on file.

1. A sustainable Internal control environment:

The key controls included in the principal processes of the Enterprise should be described and monitored.   This allows adding improvements and achieves effectiveness of controls.

In addition, the Board has to analyze the main risks strategically, and assess the strategy on how to deal with them (take, treat, transfer or terminate).

Many organizations develop some of the mentioned tasks.   To avoid doubling control costs and increase effectiveness of these tools, it’s important to provide a strategic framework to risk management.

Long way to go?   I´ll invite you to carry on the first steps!