Risk assurance in management is an approach that allows the manager to understand how to prevent, avoid, or minimize possible risks. Risk assurance is used in risk management; with the help of various tools (e.g., critical path analysis) and strategies, it helps to evaluate potential risks of the project (Basu and Wright 262). Risk assurance strategies and techniques depend on the organization’s risk priorities.
Usually, an audit committee can demand annual reports on particular hazards such as health and safety (Basu and Wright 263). However, risk assurance can cover broad concepts and approaches and is used to evaluate international and domestic risks that the company may face.
The process of risk assurance includes a review of a company’s policies, approaches, actions, and practices. The risk managers examine the context and define the risks that may arise. They can also monitor and analyze the present risks in the field to understand what risks might be a threat to the company.
Professional risk assurance can help the company establish trusting relationships with stakeholders, prevent financial losses, avoid reputation damage, and reassure sponsors regarding the company’s reliability (Hopkin 360). As can be seen, risk assurance is necessary for any corporation, large or small.
Reporting risks and any other findings are necessary because reports allow a better comprehension of the risk analysis, as well as its subsequent evaluation. As Hopkin states, risks can be reported in different types of documentation, such as improvement plans, event reports, or certification reports (361). The companies that are listed on the stock exchange are obliged to provide risk reports. These reports usually focus on the probable, rather than previous risks, so they do not analyze the past but focus on the future of the company (Hopkin 365).
Seven principles of risk disclosures have been formed by the Enhanced Disclosure Task Force and include the following requirements:
- They should be clear and understandable;
- They should be comprehensible and present the key activities and risks;
- They should be relevant;
- Management of the risks should be included;
- They should be consistent;
- Disclosures are required to be comparable;
- They should be provided on time.
Although some industries and branches are believed to be riskier than others, this does not mean that thoroughly completed risk reports can be neglected if the company is not engaged in such an industry (“Reporting Risk” p. 7). High-quality risk disclosures allow the investors to compare companies and evaluate their risk management, and that can be regarded as a reflection of the company’s professionalism (“Reporting Risk” p. 8). The problem with risk reports is that they may be perceived differently by investors. Such a perception can lead to unexpected conclusions.
Risk evaluation can be considered to be the final stage in the risk management process. Here, the risks that were identified during the risk assessment and risk assurance stages are evaluated. It is important to distinguish major and minor risks. While minor risks are not dangerous to the company, major risks can lead to catastrophic consequences and should be reviewed.
The probability of the risks, as well as their frequency, are analyzed by the risk manager during the evaluation. The probability can vary from very low to very high, depending on the industry (“Analyse and Evaluate the Impact of Risks” par. 4). Potential consequences and losses can be predicted with the help of risk evaluation. The evaluation also helps the manager understand what tools and strategies can be used to control the identified risks.
Analyse and Evaluate the Impact of Risks 2016. Web.
Basu, Ron, and J. Nevan Wright. Total Supply Chain Management, London, England: Routledge, 2010. Print.
Hopkin, Paul. Fundamentals of Risk Management: Understanding, Evaluating and Implementing Effective Risk Management, London, England: Kogan Page Publishers, 2014. Print.
Reporting Risk. 2014. Web.