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:: Enterprise Risk Management Best Practices ::

Enterprise Risk Management Best Practices

(From Assessment to Ongoing Compliance)

Author: Anne Marie Marchetti

Translators: Dr. Hossein Mohammadpour Zarandi

Dr. Mahdi Pandar

Abolfazl Gholami, Mohammadreza Zarali

Many organizations try to implement Enterprise Risk Management (ERM) program. Many of them involve in their organizational duties; so that they have been aware that they do not have expertise, sources, time and financial sources required for designing and implementing risk management in their organizations efficiently. On the other hand, organizations have been very less aware of the role-making value of efficient risk management in advancement of their organizational goals.

In this book, it is tried to disambiguate the ERM concepts with simple words and explain it scientifically in order to be used in the goal of implementing this approach well. In fact, this book follows simplification of complex concepts of risk management and simplifying its executive processes in organization. This model affects efficiently and positively in organizations on organizational costs and its implementation can have an effective role on financial function of organization.

This book consists of ten chapters. The general approach of the book explains the concept of ERM and close and similar concepts. The first chapter explains ERM, its evolution from past to present and sample of implementation of this approach.

Chapter 2 explains theoretical principles of organizational culture to provide the context for ERM approach entrance in organizations. In this chapter, organizational roles and responsibilities are considered and backgrounds of organization that they can involve in implementing this approach are explained.

In chapter three, ERM framework is scrutinized and its components are explained. Related definitions and concepts are explained well and in simple language and components of integrated risk management framework are considered. In the end, the role of board of directors about organizational risks and intervention areas of risk management in organizations are explained.

In chapter 4, the author explains ERM stages step-by-step. Strategy and goal definitions, event identification, risk evaluation, risk response, communications and monitoring ERM 6-stage in organizations are in this chapter.

COSO framework is scrutinized in chapter 5 and integrated risk management framework is explained more exactly. On the other hand a link between the risk management framework and financial structure is established and financial controls in organization are examined. One of the main functions of financial reports, evaluating organizational risks, is considered well here. All organizational affairs related to risk management are explained in this chapter in accordance with COSO standard.

In chapter 6, risk evaluation as the second component of monitoring committee framework on organizations of supporting commission “COSO” is considered under the form of financial controls and three principles related to risk evaluation including financial reporting goals, financial reporting risk, fraud risks and finally an example aimed to risk evaluation and financial controls are explained.

The author explains Oxley Sarbanes Act (SOX) as a law for accuracy and transparency improvement of financial reporting and disclosure of companies in chapter 7 and follows issues in order to improve the companies’ ethical standards importance. This law has resulted in importing enterprises in organizational structure reevaluation and domestic controls system that these issues are discussed in this chapter. The centrality of this principle is based on compliance of businesses with SOX. And its effects, necessities and different aspects are in this chapter.

In chapter 8 and 9, difficulties of constant compliance of enterprise with SOX are discussed and regarding organizations’ neglect of risk management and risk evaluation and as a result constant compliance with SOX have been discussed and internal auditing has been introduced as a creator of balance between compliance and auditing operations. On the other hand, automation process is introduced as an instrument for implementing constant compliance process more efficient and with lower cost and controls’ experiment, controls’ automation and the process and advantages of continuous monitoring.

Chapter 10 explains International Financial Report Standard (IFRS) and continuous compliance in the form of these standards. This standard is considered as the biggest event in auditing during 150 years ago. It provided access possibility to higher quality financial information for investors and shareholders. Its establishment and implementation creates a lot of challenges for enterprises and companies and training this standard requires costs and planning of companies’ projects. Also, it effects on processes, staffs, companies’ program and evaluation.


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