RISK MANAGEMENT SUPPORTED BY CORPORATE GOVERNANCE COLOMBIA Alfonso Parias, Risk Control Manager...
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Transcript of RISK MANAGEMENT SUPPORTED BY CORPORATE GOVERNANCE COLOMBIA Alfonso Parias, Risk Control Manager...
RISK MANAGEMENT
SUPPORTED BY
CORPORATE GOVERNANCE
COLOMBIA
Alfonso Parias, Risk Control ManagerOctober 9, 2007
2
Risk Management
Is defined as the culture, processes and structure aimed at
obtaining potential opportunities while dealing adverse events
Culture
Processes
Structures
Introduction
3
Corporate Governance
Corporate Governance is a system of guidance, established by
standard management practices which operates within a
structure of governance that has been designed for the
organization.
System of guidance
Management practices
Governance structure
4
Therefore..............
Having adequate Corporate Governance practices, guidance and
management systems, culture, processes and structures are
adopted in order to obtain potential opportunities and to
handle adverse effects.
Thereby increasing, maximizing and maintaining the
organization’s value.
5
Risk Management and Corporate Governance
Risk Management
Corporate Governance
Corporate Governance is the organization’s strategic
response to risk, and effective risk management is the
cornerstone of solid governance.
System of guidance
Management practices
Governance structure
Culture
Processes
Structures
=
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• Risk Management is a good Corporate Governance policy.
• Risk Management is a proactive policy.
• Risk Management is a strategic policy.
• Risk Management is compliance with rules and regulations.
Global Risk 2007 from World Economic Forum – Global Risk Network Report.
A future vision of Risk Management
Comments
7
The ATLAS syndrome
Risk Management is party to Corporate Policy,
not the exclusive responsibility of one part
of the organization
8
Evolution of integrated risk management
Reactive level :Reactive level :
Neither the Board of Directors nor senior management
place sufficient emphasis on risk management
Risk management exists; however it is isolated
Risk coverage
is incomplete in some critical aspects
There is no common approach nor language for risk
management
9
Evolution of integrated risk management
Tactical level:Tactical level:
There is strong support from the Board of Directors and senior management
A Risk Committee exists
Periodically, risk profiles are determined
The need for comprehensive risk management is recognized
10
Evolution of integrated risk management
Strategic level:Strategic level:
There are proactive risk committees with the Board and senior management
An administration and evaluation of risks is performed throughout the entire organization
There is a common approach and language
There is an analysis of risk in real time
Optimization and risk reports
11
A new approach :
PREVIOUSLY Presently
Risks were considered separately
Risks within the context of corporate strategy
Identification and evaluation of risk
Develops a risk “portfolio”
Considers all risks Considers critical risks
Risk mitigation Risk optimization
Limits of risk Strategies of risk
Risks for which no one is responsible
Assigned responsibilities according to the risk
Quantifying inconsistent risk
Observation and measuring
Risk is not my responsibility
Risk is everyone’s responsibility
The old methods of risk management are no longer appropriate, and as a result a new approach has been adopted:
12
The greatest risk of all is to have
unknown weaknesses ……
and on account of this, it is necessary……
to design a corporate strategythat is capable of detecting unknown
weaknesses and to create a plan of action
Therefore……………
13
The management of a risk administration through Corporate Governance
Establish a context
Identify risks
Analyze risks
Evaluate risks
Handle risks
AS/NZ 4360 Standard
Corporate Governance
Observation and measurement
Communication and consultation
Structure
14
The key principles that support a solid Corporate Governance:
Establish solid principles for management and
supervision.
Structure the Board of Directors in a manner that value
will be added.
Recognize and handle risk.
Provide guidance .
Generate control.
To be accountable.
Determine authority.
Manage.
Supervise.
Principles related to risk management
15
Corporate Governance Committees
Board of Directors
Corporate Governance
• 3 MEMBERS FROM THE BOARD OF DIRECTORS• 1 INDEPENDENT MEMBER
RiskCommittee
Appointments Committee
Corporate Governance Committee
Financial Committee
SCOPE: • Strategic risks.• Financial Risks.• Market risks.• Operational risks.• Image risks.• Legal Risks.
16
Management structure for the administration of risks through Corporate Governance
Board of Directors
Risk Management
President
Corporate Governance
Risk Committee
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Character and aim of the Risk Committee
The Risk Committee is a collegiate organization with
direct responsibility to the Board, and whose aim is to
guarantee acceptable policies, mechanisms and procedures
for Risk Management.
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Functions and Responsibilities of the Risk Committee
Risk Management.
Program for Business Continuity.
Evaluation and adoption of international standards in
risk matters in accordance with recommendations from the
Bank of International Payments, the Committee for the
System of Payments and Settlement of Securities, the
International Organization of Securities Commissions
(IOSCO) and the Group of 30.
Prevention and Control of Asset Laundering and the
Financing of Terrorism.
Code of Conduct.
19
Benefits derived by the Board from the Risk Committee
More efficient strategic and operational planning.
Greater confidence in achieving planned objectives, both
strategic and operational.
Greater flexibility within the organization wasting less
time and improving the organization’s potential for taking
advantage of opportunities.
Greater confidence in the decision making process.
Greater confidence by the parties involved and an
increase in equity.
Board Member’s protection.
20
Sources:
• Principles of Good Corporate Governance and Best Practice Recommendations, Corporate Governance Counsel, ASX, april 2003.
• Australian Stock Exchange Corporate Governance Council.
• Global Risk 2007 from the World Economic Forum – Global Risk Network Report.
•Standard AS/NZ 4360 - 2006.
• Handbook 254 – 2005.
• Colombian Technical Norm 5254 – 2006. Colombian Institute of Technical Norms and Certification, ICONTEC.
21
Alfonso Párias Polanco
RISK AND COMPLIANCE MANAGER with DECEVAL S.A.
E-mail: [email protected]
Member of the risk committee of ICONTEC de COLOMBIA. Member of the working group on the evaluation and implementation on the Colombian Technical Norm NTC 5254 based on international norm AS/NZ 4360. Years 2005 - 2007
PRIMA. Member of the PROFESSIONAL RISK MANAGER’S INTERNATIONAL ASSOCIATION. 2005 – 2007.
GARP. Member of the GLOBAL ASSOCIATION OF RISK PROFESSIONALS. 2006 – 2007.
ACAMS. Member of the ASSOCIATION OF CERTIFIED ANTI MONEY LAUNDERING SPECIALISTS. 2004, 2005, 2006 y 2007.
www.deceval.com