Corporate executives tend to underestimate the importance of risk management, of which the effect is difficult to assess until the risk-related events occur, while focusing on management of key performance indicators directly related to performance evaluation.
Leading companies’ recent risk management failures indicate that cost of risk management, related to preventing future events with adverse impact, is much less than the actual loss from the event. In addition, it is more likely to encounter unexpected risks under a rapidly changing business environment.
To establish risk management:
- Prioritize the identified risks based on assessment, and systematically align the focused on risks of the executives and business leaders.
- Determine the responsible personnel for key risks, reporting structure and the monitoring method.
- Establish AN entity-level risk management framework containing performance evaluation structure with balanced consideration of performance result and level of risk management.