Leveraging Effective Risk Management and Internal Control

627 Words3 Pages
The main issue in this article is the importance of effective risk management and internal controls to achieve organizational success. Risk not only includes threats, but also potential opportunities, so it is critical for a company to understand how to manage it in order to take advantage of those opportunities, while also countering threats. There is a wide variety of risk management and internal control tools that can utilized, but often times these aren’t used to their full extent or integrated into the specific needs of the organization. Companies need risk management and internal controls for many reasons. Risk, as already mentioned, can be a good thing or bad. How a company handles it is important and can determine success of the risk event. Internal controls are instituted not only for reporting purposes, but also to enable the organization to take advantage of the opportunities that risk offers or to prevent, mitigate, or control the outcomes of threats, attacks, and other negative risks. The article highlights the importance of risk management to companies: “Several factors caused the recent global financial crisis. Ethical flaws and regulatory overload, leading to legalistic compliance, played a role. So did ineffective governance, risk management, and internal control” (30). Another way to look at it is that all companies have objectives, or goals. Without these goals, there would be no risk; therefore, with the inevitable risk that organizations face, they must determine a proper method to manage and take advantage of it. The textbook mentions that the CFO is responsible for risk management, which, according to the diagram on page 35 of the article, would also include internal control. However the article seems to support the idea that the whole team is responsible for risk management. Managers can set examples for RM/IC in their actions and
Open Document