Risk Management

Organizations are faced with a wide variety of risks. These risks can be physical, finan-cial, or both. This class examines the basic concepts of risk management and discusses general operational risks. In most organizations, treasury is responsible for financial risk management as well as general risk management for treasury operations. In a growing number of organizations, treasury is also directly or indirectly involved in iden¬tifying and managing overall risk for the enterprise. This involvement may range from being asked to help identify and quantify various risk elements to being directly respon¬sible for overall risk management for the entire company. Effective risk management helps minimize the adverse effects of actual and potential losses by either preventing such losses from occurring (i.e., risk control) or financing the recovery from any losses that do occur (i.e., risk financing). The purpose of the risk man¬agement process in an organization is to: • Help managers identify future events that create uncertainty • Respond to negative possibilities by balancing the negative economic and/or reg¬ulatory effects of these possibilities with the costs that can be incurred to mitigate or eliminate them • Provide direction to guide recovery actions when serious negative events occur The term enterprise risk management (ERM) refers to a comprehensive, organization-wide approach to identifying, measuring, and managing the various risks that threaten the achievement of the organization's strategic objectives and therefore its overall operations. It is characterized by having a viewpoint that encompasses all areas of the organization. In many organizations, the board of directors has a risk management committee that provides oversight to management regarding the identification and evaluation of ERM-related issues. Some organizations have also added the position of chief risk officer (CRO)—sometimes known as a chief risk management officer (CRMO)—whose primary responsibility is ERM. In these organizations, the CRO is the executive accountable to the board of directors for the efficient and effective governance of significant risks—and related opportunities—for the organization and its various segments. This class begins with general risk management principles, including techniques used to measure and monitor risk, a discussion of the various types of enterprise and operational risk, a brief discussion of disaster recovery and business continuity plans, and a discussion of insurance as part of the risk management process. Next, we build on that framework and discuss some of the tools and techniques available to the treasury professional to manage the specific area of financial risk. Since the treasury department is a clearinghouse for daily financial information, treasury professionals are in a good position to understand and help control an organization's exposure to various forms of financial risk. For domestic companies, financial risk has traditionally been in the area of interest rate risk, but the increased rate of globalization and international trade has created a corresponding need for managing foreign exchange (FX) risk. Fortunately this is an area that multinational companies have had to deal with for many years, and the processes and tools available to manage FX risk are well developed. Organizations use policies to identify and describe their risks, and to establish the limits, guidelines, accountabilities, and risk management practices the organization deems essential. A policy is intended to serve as a statement to guide activities in a particular area or function of an organization and to establish performance evaluation guidelines and process measurements. A procedure, sometimes referred to as a standard operating procedure, or SOP, is a specified series of actions or operations that should be executed in a consistent manner to achieve desired results identified in the policy. In other words, the procedures must follow the guidelines of the policy. Policies and procedures should be clearly stated and enforced—they are the basic principles, often approved by the board of directors, by which an organization operates. The class concludes with an overview of treasury policies and procedures and discusses the key elements needed in developing an effective policy statement. It then presents a more detailed discussion of one specific policy statement to provide an overall example of policy development. Students are provided with a list of key treasury policies and the various elements that should be considered when developing them.

  • Item #: ABT0002

Risk Management

Price: $1,399.00
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