The international federation of accountants works for the betterment of auditors and accountants. IFAC conduct survey, publish research papers and organise conferences. It connects member bodies to promote quality with international standards. IFAC has its roots in New York and the members are from different countries. The services of IFAC are setting standards on auditing, quality control, code of ethics for international accountants, accounting standards of public sector and education standards. ICMAI institute had published the recent paper of IFAC on its portal. The finance and management committee of IFAC has its members in Austria, Italy, France, Pakistan, and the UK. The committee formed by IFAC recommends managing risk to enhance stakeholder value. Risk management and research paper by IFAC is the blog worth sharing. It is about important new IFAC papers on risk management.
Integration of risk:
Risk management is part of internal control. In case of overemphasis on risk, employees become risk-averse. Risk management is an inseparable part of management. Risk management is useful for the employees taking care of management, an integral part, and strategic management. Future-ready governance and risk management has growth and sustainability. Unilever is the leading supplier of consumer goods, and it has its business in 100 countries. The management unit of Unilever said that understanding the opportunities and risk is the fundamental requirement of business management. The role of management accountants is functional and strategic. IFAC member organisations provide action plans, and it is essential to check the disclaimer provided by the member country. The operating model of the business produces risk. This risk affects investors, stakeholders and the board of directors. Opportunities are the revolutionary element, and it is unpredictable. The role of directors indulges in understanding the opportunities and taking relevant steps for risk management. IFAC had published the report on a global survey of risk management. The global survey on risk management and internal control points out the strengths and weaknesses, frameworks, national guidelines. Risk management has its impact on the objectives, decisions and action plans. The following points provide insights into the integration of risk management in organisations.
• Educating the employees about risk management is the primary focus of integral management. The employees think about their job and organisational objectives. The connection between objectives and risk is implicit. So, it is essential to make this area explicit.
• In organisations, risk management is connected to the long term objectives of the Company. So, they devote time and funds to risk management. The short term success, uncertainty and objectives have inter-connection. Organisations need to implement risk management from the fundamental level to the top management level. The objectives, strategies of the organisation is changing. The risk educates the lesson to set the objectives and strategies.
• Risk management is the framework that has a global impact. The different environments of the organisation such as the customers, competitors, suppliers, IT systems, financial flexibility, business size and structure contribute to risk management. The formal, structured and timely process of risk management help for controlling the risk. The role of risk management is internal assurance. So, thinking about all aspect and time specifications help for better management.
• Risk management is the responsibility of top management to the low-level management.
• Risk reports educate about the level of risk in different types of industries. According to the business of the Company, the inter-connection of risk with other factor differ.
• Emotion, fear and greed make the management a failure. The management needs to connect the decisions and risk assessment.
• The information or data used to make a decision should be of high quality. The evaluation techniques for the given information must be professional. The data source and the evaluation technique both are crucial parts of decision making.
• The objectives have several baby steps. Similarly, the decisions are followed by a cascade of steps to implement. Organisations need to understand the degree of risk with the follow-ups in the designing, executing, planning, monitoring and reviewing.
• The action plans of the organisations must be agile. It is not possible to create zero risky business. The organisations need to work on the change with unforeseen events. Adaptability is the factor that contributes to the success of organisations.
Leaders around the world:
A recent report about risk management in IFAC report says that traditional risk management revolves around minimising loss. In modern days the meaning of risk management is related to the uncertainty in achieving strategic objectives. The gamut of risk is twofold. And the first one is about the traditional threat associated with loss. The threat with establishment, implementation, maintenance and operation is a strategic threat. IFAC created a structure with standards for top leaders to update regarding risk-aware culture. This open-source support the leaders around the world to realise the relevant improvements.
Dynamic projects require risk management. The legal liabilities, financial uncertainties, natural disasters and errors with strategic management lead to the loss. Apart from internal and external factors, enterprise risk management also emphasizes the value of the firms. Risk tolerance and risk management have become complex due to globalization. Artificial intelligence, governance and risk management platforms around the world explore ways to minimize risk. In manufacturing companies, risk management is qualitative. In banks and finance Companies risk management is quantitative. The risk is associated with exact numbers. Cost accountants play a crucial role in understanding global practices and managing the risk. The research paper of IFAC published by ICMAI is helpful for the students to understand the best practices and structured approach to risk management.