...stakeholders including customers, owners, employees, regulators, suppliers and society. Each stakeholder seeks a separate form of value from an organization therefore ERM will effect each group somewhat differently. “Under the theory that a company is set up in order to create maximum value for all stakeholders, all activities related to operations are as of necessity exposed to risk. The Enterprise Risk Management (ERM) is a tool managers can utilize to respond to impending risks, uncertainties and opportunities. It efficiently and effectively increases the value of a firm” (Laisasikorn, Rompho) Performance Measures Owners/Management “The greatest overall value from ERM and related reporting is the timeliness, conciseness, and flexibility, which facilitate improved decision making capabilities within the executive and director levels, and in other layers of management”. (Ulrey,Sue) Owners are primarily concerned with the financial well-being of the company. They strive to ensure that funds are best utilized to attain the organizational objectives and maximum the rate of return achieved with minimal risk. This is accomplished only through effective and efficient operation of the company provided with a well operating ERM. Customers Customers must get quality products at reasonable prices. The consumer dollar is the purpose of any organization at its root. Should clients be unsatisfied with the company or product they will spend their dollar with a competing company. Employees ...
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...The Importance of Enterprise Risk Management Introduction Enterprise risk management “calls for corporations to identify all the risks they face, to decide which risks [need] managing actively, and then to make that plan of action available to all stakeholders (not simply shareholders) as part of their annual report (Quinn, 2008). According to Quinn (2008), “What you don’t know about corporate enterprise risk management (ERM) may hurt you—and probably already is. Think of the number of post-Enron cases that have resulted in retirement benefits and stock value being wiped out overnight and weaknesses in corporate information technology systems that have allowed hackers to steal your identity (if not your wealth). All of these and a growing number of events are debacles you might have avoided had companies had an effective ERM program in place.” So what does ERM mean to management when it comes to improving the planning, performance, and effectiveness of business operations through better decision making; and, how do employees, customers and investors benefit from having a strong ERM process? We live in a world where technology dominates everything. Businesses cannot efficiently or effectively operate if they are not technologically equipped. For every workstation there is almost always a computer. For every computer there is almost always an internet connection. That Internet connection connects to the entire world. By being connected to the entire world, there...
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...# 2 Chapter 4 – Risk Management In the 1970s, corporate and political campaign finance corruption was running rampant. The United State Securities and the Exchange commission and the United States Congress together ratified campaign finance law reforms and the 1977 Foreign Corrupt Practices Act. These two laws made it a criminal offense for any corporations or persons to be involved in global bribery and required all companies to implement internal control systems. In 1985, in response to these reforms 5 major private sector accounting associations together created The Committee Of Sponsoring Organizations, also referred to as COSO, to help sponsor the National Commission on Fraudulent Financial Reporting (Treadway Commission). The 5 associations included the American Institute of Certified Public Accountants, American Accounting Association, Financial Executives International, Institute of Internal Auditors and the Institute of Management Accountants. The original chairman of COSO was James Treadway, which led to it being referred to as the Treadway Commission. This association was formed to inspect, analyze and make recommendations of fraudulent corporate financial reporting. Today this association is dedicated to providing thought leadership through the development of frameworks and guidance on enterprise risk management, internal control and fraud deterrence. COSO offers 5 key components to the Internal Control Framework: Control Environment, Risk Assessment, Control...
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...The title of this study is “Success Factors for Implementing Enterprise Risk Management” by David Bowling and Lawrence Rieger. Enterprise risk management (ERM) has become a topic of increasing interest over the years. Continuing regulatory scrutiny and COSO releasing a new framework is driving this discussion. The general area of study for this research is ERM implementation, more specifically, implementing COSO’s framework. Companies are starting to realize the benefits of having a framework in place and the value it brings to their organization. The specific purpose of this article is to dissect the components of COSO’s ERM Framework. The author’s then describe how to take that framework and implement it into business practice, while discussing some of the challenges that may be encountered. The author’s take a minute to quickly review the COSO Framework and explain the importance of corporate governance. Companies must establish their risk appetite before implementation. Implementation takes time but is a key component of the corporate governance framework. Corporate governance addresses the needs of all stakeholders which ensures the sustainability of the company in the long term. A qualitative method was used in this study. Three of the challenges encountered during implementation were lack of support from upper management, insufficient resources and the stamina/focus to last throughout the process. Some of the success factors are a focus on strategy and business...
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...Enterprise Risk Management Enterprise risk management can be described as a process of managing risks and opportunities by planning, organizing, leading, and controlling activities in an organization. ERM means being able to identify, assess, and prioritize risks and opportunities to reduce or increase the effects it has on an organization’s capital, earnings, and overall objectives. When identifying risks, an organization is able to distinguish between certain conditions that are potential in effecting its business. Assessing them simply means monitoring how large of an impact it is on an organization, which is then prioritized from major to minor impacts. It involves risks related to accidental losses, financial, strategic, or operational risks, and other additional risks. There are many frameworks that are used in enterprise risk management which involves identifying, analyzing, responding to, and monitoring risks and opportunities. This is used within the external and internal settings of an organization. To begin, management of an organization chooses a risk response strategy for specific risks that are identified and analyzed. With this strategy in place, an organization may implement different plans such as avoiding, reducing, sharing or insuring, or accepting the risk. This helps to reduce the impact of a risk effecting the organization. Management now monitors activities once an action is chosen. There are different levels of management in which these...
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...Enterprise Risk Management Lori Abbott Law 531 September 24, 2012 Charles Burr Enterprise Risk Management Enterprise risk management (ERM) is the latest name for a risk management approach to business risks. Forerunners of this term include corporate risk management, business risk management, strategic risk management, integrated risk management, and holistic risk management (D'Arcy, 2001). Implementing the techniques of ERM will allow businesses to manage any potential tort issues and manage any potential civil suit cases. Tort is defined as a wrongful act or damage done willfully or negligently. The circumstances involving a tort can be strict liability or breach of contract that can bring about a civil suit (Cheeseman, 2010). This paper will provide potential tort risks that arose in the product liability video between Non-Linear Pro (NLP) and Quick Takes Video (QTV), identify a tort violation, and apply the 7-step process of enterprise risk management to mitigate the business risk associated with the violation. Potential Risks Some of the potential risks for NLP are the editing system has taken longer to set up, it has defects in manufacture and design, and it is an inferior product that did not meet the expectations of QTV. QTV leased the editing system from NLP with the understanding the new editing system would save QTV a substantial amount of time. The fact the videos had to be digitalized before the editing system could used was not mentioned...
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...Enterprise Risk Management The Non-Linear Pro salesman told the manager of Quick Takes Video that the editing system leased would allow the employees to edit material twice as fast after only a day and a half of set up and training. After all employees received the one-day training course, completed the video tutorial, and read the manual, problems with the equipment stopped production of a Quick Takes Video project. During an attempt to insert a CD, an employee cut her finger on a sharp edge of the poorly designed equipment. Two different types of torts arose in the Product Liability Video. One type, an intentional tort occurred as a result of the implied warrantee when the salesman described the benefits of the editing system. The employee’s cut finger could result in an unintentional tort because the manufacturer has the requirement of selling a safe product but did not intend to harm the employee. The main tort violation from the video involves the implied warrantee given by the Non-Linear Pro salesman. The manager of Quick Takes Video perceived the quote taken from the video Cheeseman (2010), “Any of your editors, if they’re computer savvy, they’re going to pick this up in a day, day and a half tops” (video, 02:79), as an expressed warrantee. This perception persuaded the manager to lease the equipment. Team A used enterprise risk management (ERM) to analyze the business risk associated with the violation (Harb, 2008). Adequate Compliance Standards and Procedures...
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...advisors, nor should it be used as a basis for any decision or action that may affect your organization. Authors Deloitte & Touche LLP Principal Contributors Dr. Patchin Curtis Director, Deloitte & Touche LLP Mark Carey Partner, Deloitte & Touche LLP COSO Board Members David L. Landsittel COSO Chair Marie N. Hollein Financial Executives International Douglas F. Prawitt American Accounting Association Chuck E. Landes American Institute of CPAs (AICPA) Richard F. Chambers The Institute of Internal Auditors Sandra Richtermeyer Institute of Management Accountants Preface This project was commissioned by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), which is dedicated to providing thought leadership through the development of comprehensive frameworks and guidance on enterprise risk management, internal control, and fraud deterrence designed to improve organizational performance and governance and to reduce the extent of fraud in organizations. COSO is a private-sector initiative jointly sponsored and funded by the following organizations: American Accounting Association (AAA) American Institute of CPAs (AICPA) Financial Executives International (FEI)...
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...Enterprise Risk Management Lowell Adkins, Garry Hardison Jr, Rickie Morgan, Tracy Ramos 531/Law July 11, 2012 Michael J. Mills, J.D. Enterprise Risk Management Non-Linear Pro is an organization that sells and leases video editing equipment. The company claims by using their editing system it will reduce work hours on a variety of projects. Non-Linear Pro recently leased its equipment on a trial basis to Quick Takes Video; a company that edits documentaries, sports, and various events. However, during the trial the employees of Quick Takes Video, along with management, claim the product did not function properly under the agreed leasing arrangement. Nonetheless, Non-Linear Pro has taken legal action against Quick Takes Video stating they are liable for $5,000 for the use of its editing system. Quick Takes Video may countersue Non-Linear Pro under section 2A-201 of the Uniform Commercial Code (UCC) that is the basic Statute of Frauds provision for contracts for the leasing of goods (Cheeseman, 2010). In this paper the authors will identify the potential tort risk of Product Liability that has escalated between the two companies. The authors will also discuss how the proper design and execution of an Enterprise Risk Management (ERM) system would help Non-Linear Pro avoid accusations that its sales team is misrepresenting the product and using fraudulent tactics to influence customers to purchase its equipment. Management Commitment to ERM The ability to manage...
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...subsequently corrected this violation and has since enjoyed a good overall environmental compliance record. This paper will identify potential tort risks resulting from this violation and utilize the seven-step Harb process to mitigate associated business risks. Torts Alumina Inc. is considered one of the largest aluminum makers in the world. The company operates in Erehwon and is under the EPS’s jurisdiction in region 6. The first tort against Alumina was found to be negligence. Five years ago, Alumina failed to follow the environmental discharge norms set by the EPA that resulted in high levels of PAH in the samples. Polycyclic aromatic hydrocarbons (PAH) are a family of chemicals primarily derived from oil and coal but also produced as byproducts from burning of a variety of materials (Nevison, 2008). The EPA demanded a clean-up in which Alumina quickly complied and rectified the negligence allegation. Alumina was allowed to continue business without prosecution and complied with all regulation following the incident. However, Kelly Bates, a resident of the community where Alumina operates, is claiming that her 10-year-old daughter’s leukemia is a direct result of the high PAH levels in the community’s water supply. A second tort that could have resulted in litigation would be the liability of Alumina. An Alumina risk manager deciding how to best handle this situation may decide to test for further PAH violations in the Lake Dira water supply. By testing further...
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...May 27, 2011 | Laert Koceku | | | Enterprise Risk management | | Enterprise Risk management | About a decade ago, Mercer Management Consulting firm studied the causes that caused stock prices of companies in Fortune 1000 to decrease on 1990. The study included the causes that lead to this decrease in stock prices categorizing them as strategic and operational failures rather than the traditionally categorized as hazardous and financial. The study underlined the importance of analyzing the operation decisions in the firm regarding to the risk they carried. The trend of increase in the complexity of risk, due to the evolution of players of the market and the market itself, required improved and more sophisticated tools to deal with it. The recognition of Enterprise Risk Management as a solution on the dominance over risk is widespread. Traditionally, risky events were seen as unrelated to each other, where every risk identified a part of the business. Managers would deal with the risks individually in every branch of the company, to obtain the required level of risk for the entire company. The main strategies included buying the cheapest insurance possible that didn’t exceed the expenses appointed in the budget and through the capital market using derivate instruments. Risk was measured only on the downside of it focusing on the currency and interest rate risks, or terrorist attacks, and not considering the profitable opportunities that might arise. Historically,...
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...potential tort risks that were addressed the simulation .Classify the type of each of these torts, such as negligence, strict liability, and so on. Identify a tort violation from the simulation. Then use the 7- step process as defined in the Harb article to apply the risk management to mitigate the business risk associated with that violation. The business regulation simulation presented involves Alumina Inc. aluminum maker, operating in 8 countries. Alumina was reported to be in violation of environmental discharge norms in a routine EPA compliance evaluation inspection 5 years ago. The company corrected the violation and has enjoyed overall environmental regulation compliance record. This paper will identify potential torts resulting from this violation and utilizing the 7 Step Process. Torts: Negligence: The Company failed to follow the environmental discharge. Another tort that would have resulted in litigation would be liability with Alumina, Inc. The managers trying to handle the situation may decide to test for further PAH violations. With a liability tort management should seek some kind of mediation for damages toward the Bates family through AAA (American Arbitration Association). Harb Process: 1. Management Commitment- Risk Management effectiveness: The Company (ALUMINA) must commit in developing and managing the ERM process. Promoting and integrating the benefits of ERM can be beneficial to Alumina as first step in minimizing and mitigating risks of environmental...
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...Enterprise Risk Management at Hydro One Case Study Strategic Objective * Be the best transmission and distribution business in North America; * Implement Enterprise Risk Management by a risk-based investment planning system * 90% customer satisfaction Risk * Loss of competitiveness and volatility of financial markets; * Employee safety issues * Uncertainty in government * Equipment failure * Environment issues Strength The risk assessment process fully involves every aspect of the business. Meanwhile, instead of using a probability test to identify the potential outcomes and associated probabilities, Hydro One chose to focus on “worst credible” outcome within a given time frame and its associated probability of occurrence. It helped the group to assess the magnitude of a given risk, its probabilities and the strength of existing controls. This simple, qualitative approach has proven to be a practical and efficient way to focus on major risks while avoiding excessive detail and complex calculations. Besides, the risks are identified in a 2 to 3 year time frame. This forward looking way gets mangers to think over a 2 to 3 year horizon. Once risks and controls are assessed, a manager will be assigned to be the “risk owner” to develop specific plans to mitigate the risk, that is, a rank-ordered list of “residual risks” is assembled. Also, risk management staff do not attend internal audit meetings and the information...
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...place to make sure that businesses were not breaking the laws. “Title VII of the Civil Rights Act of 1964 was primarily enacted to prohibit employment discrimination based on race, color, and national origin” (Cheeseman, 2010). In the Walgreens discrimination case it was clear that there was not only race discrimination but also color discrimination. Walgreens had involved themselves in several legal issues. Walgreens did not follow Title VII of the Civil Rights Act of 1964. It caused the EEOC to get involved. The EEOC filed a complaint against Walgreens. There were also several other lawsuits filed against Walgreens, those were done privately. The charge against Walgreens was that they discrimination against African Americans in retail management and pharmacy employees for promotions and more. For the individuals in this case I think that by contacting a lawyer they not only protected themselves but they also protected other future employees....
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...Enterprise Risk Management (ERM) provides a framework of planning, organizing and controlling activities that made by organizations in order to manage and minimize the effects or risk on the organization’s capital and earnings. ERM is also associated with accidental losses, which include financial, strategic, operational, and other risks. Every organization must follow all the local, state, and federal laws they must also comply with Environmental Procreation Agency (EPA). Alumina Incorporation is an international organization that operates in more than eight countries, which operates out of the United States. In the years Alumina Inc. has maintained a good environmental regulation with only one violation in recorded five years ago. A lawsuit involving Alumina Inc. which claims that the EPA violation from years ago was the cause of a 10-year-old girl’s diagnosis with leukemia. This paper will discuss the potential tort cases that could transpire from the Alumina Business Regulation simulation and the seven-step process of Enterprise Risk Management (ERM) dealing with the potential negligence case against Alumina Inc. The tort case involving negligence by Alumina Inc. would be the most obvious tort because of the claim made by the mother of the 10-year-old with leukemia. This would be a negligence case involving a violation of a statute making this a case of negligence. Policies and Procedures Policies and procedures are the guidelines and rules that are adopted by a company;...
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