Risk management is not just an internal Management process. It is also to be used to improve the transparency in a firm's relationship with key stakeholders.
The board of directors instance needs periodic reports and updates on the major risks faced by the organisation in order to review and approve risk management policies for control in those risks. Regulators need to be assured that sound business practices are in place, and that business operations are in compliance with regulatory requirements. Equity analysis and rating Agencies need risk information to develop their investment and credit opinions. An important objective for management in communicating and reporting to this key stakeholders in an assurance that appropriate risk management strategies are in effect. Otherwise the company will not get full credit since interested parties will see the risk but may not see the controls. The increasing Emphasis of analyst presentations and annual reports on a company's risk management capabilities is evidence of the importance now place on stakeholder communication.
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