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Enterprise Risk Management Expectations Outpacing Capabilities and The Audit Committee’s Role July 30, 2013 Presented by: Suzette E. Ramsden (B.Sc., CISA, CBRA, CRMA) Caribbean Association of Audit Committee Members Inc. 7th Annual General Meeting and Conference

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Enterprise Risk ManagementExpectations Outpacing Capabilities and

The Audit Committee’s RoleJuly 30, 2013Presented by: Suzette E. Ramsden (B.Sc., CISA, CBRA, CRMA)

Caribbean Association of Audit Committee Members Inc.

7th Annual General Meeting and Conference

“Governance, Audit and Compliance: Changing the Way We Do Business

Hilton Trinidad Hotel & Conference Centre: July 29-30, 2013

enterprise wide risk management
Enterprise-Wide Risk Management

“Enterprise Risk Management is a process, effected by the entity’s board of directors, management, and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risk to be within the risk appetite, to provide reasonable assurance regarding the achievement of objectives”

COSO’s Enterprise Risk Management – Integrated Framework (2004)

erm in today s global economy
ERM in Today’s Global Economy

“Risk Management is at the top of the global executive agenda as companies face an array of threats that grow more complexby the day. The risks are multitudinous and ever-present, andthose companies that fail to manage them well imperil their future”

keeping pace
Keeping Pace

“…challenges are growing faster than most organizations’

abilities to respond: today’s complex environment requires an even stronger capability to master and optimize Risk Management.”

Ability

Challenges

contributors
Contributors

Risk Management capabilities are not advancing fast enough

Significant gaps and weaknesses in the management of Enterprise Risk

Inability to manage risk in an integrated and holistic way

constantly evolving
Constantly Evolving

“When Risk Management is a strategic tool, the risk program and profile will constantly evolve..”

shift in the aftermath
Shift in the Aftermath

In the aftermath of the Global Financial Storm

Risk-Taking

Risk-Savvy

Risk-Averse

Ensure

Risk Programs

don’t go stale

Unmanaged Risk

Risk

Programs

Models

Relevant to new Economic Environment

Ever-Expanding

Economy

Stagnant

Economies

erm roles
ERM Roles

Board of Directors

Oversight - Effectively oversee the organization’s Enterprise-Wide Risk Management.

Audit Committee

Provide assurance regarding the status of the organization’s Risk Management processes; that they are active, credible and effective.

Although the ultimate accountability for Risk Management performance remains with the Board of Directors, boards are increasingly looking to board committees to provide assurance regarding the status of the organization’s Risk management processes

Internal Audit

An independent, objective assurance and consulting activity to provide objective assurance to the board on the effectiveness of Risk Management.

Audit Committee Charter

audit committee agenda
Audit Committee Agenda

SO...

What should audit committees look for in a company’s Enterprise-Wide Risk Management endeavours to ensure abilities are not lagging behind expectations?

intersection of strategy and risk
Intersection of Strategy and Risk

Enterprise Risk Management resources and actions must be integrated into Strategic Planning process

Tool for collaborative decision-making embedded into management

routines such

as strategic

planning

Engaging in discussion and dialogue with designated risk owners (senior mgnt) to

keep abreast of emerging risks

assessing risk exposures
Assessing Risk Exposures

Ensure consistency in the way risk is being assessed across the enterprise

Is your organization conducting regular top down and middle-up assessments and alignment of them to create a comprehensive risk profile of the enterprise?

Is Management focusing on those lower level operational risk that could frustrate accomplishment of the Board’s objectives for the company ?

Are risks being aggregated and the inter-relationships identified to have a clear understanding of the velocity at which risks may occur.

Is guidance provided to the business units and functional groups to ensure that they have a consistent approach that is focused on business objectives?

articulate risk appetite
Articulate Risk Appetite

Develop a formal Risk Appetite Statement

How do you know whether you have taken too much or not enough risk

Calculate the

monetary value at which a loss or risk event would jeopardize its credit rating

Aggregate risk exposure monitored in monetary terms

Risk appetite embedded into the business units and functional areas

Risk Appetite

Corporate

Stress-test the resilience of their balance sheets by calculating the monetary value at which solvency would be jeopardized.

Operational

three lines of defense
Three Lines of Defense

Enhance Risk Management via Business Units, Risk & Compliance and Internal Audit functions

3

3

Are Risk Management capabilities keeping pace with the changing needs of the enterprise and expectations of stakeholders?

Is consistent risk training being conducted across your three lines of defense?

Are processes and technologies in place to monitor and measure risk in a way that get the

three lines of defense closer in

alignment?

Is risk information between lines of defense visible, freely shared and

communicated to

support

dependencies?

Do your Board, shareholders and regulators understand your risk program?

Is Risk Management embedded in business processes in a way

that enhances transparency?

2

2

Business Unit

Risk & Compliance

Internal Audit

barriers to convergence
Barriers to Convergence

Resources must be adequate to facilitate convergence or integration of risk and control functions

Lack of executive support

Lagging governance structures

Stagnant risk and

control oversight functions

Insufficient numbers of people

Lack of skills and human talent

Absence of technology enablers

Risk and control silos

Obstructed flow of risk information

Changing goals and less clarity of risk data

Duplication and redundancy

creating a risk resilient culture a call to action
Creating a Risk-Resilient Culture:A call to action

Risk

Management

Framework

Key Questions

  • How do you establish stakeholders’ expectations?
  • How do you communicate Risk Management to the organization?
  • How do you ensure that these Risk Management expectations are followed?

Risk

Resilient

Culture

Risk

Governance

Structure

kpmg contact information
KPMG Contact Information

Robert Alleyne

Managing Partner

1-868-623-1081

ralleyne@kpmg.co.tt

KPMG

69-71 Edward Street

Port-of-Spain

Trinidad and Tobago

Dushyant Sookram

Partner, Advisory

1-868-623-1081

dsookram@kpmg.co.tt

KPMG

69-71 Edward Street

Port-of-Spain

Trinidad and Tobago

Neil Bhola

Manager, Advisory

1-868-623-1081

nbhola@kpmg.co.tt

KPMG

69-71 Edward Street

Port-of-Spain

Trinidad and Tobago

Suzette Ramsden

Manager, Advisory

1-868-623-1081

sramsden@kpmg.co.tt

KPMG

69-71 Edward Street

Port-of-Spain

Trinidad and Tobago