IMFO - Risk Management March2016 · IMFO - Partnership for the Women in Public Sector Seminar Risk Management – enhance financial prudence and enhance sustainable service

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IMFO - Partnership forthe Women in PublicSector SeminarRisk Management – enhancefinancial prudence andenhance sustainable servicedelivery

7 March 2016

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Agenda

1. Introduction to Enterprise Risk Management (ERM)

2. Benefits of effective ERM

3. Challenges facing businesses today

4. Case Study

Slide 2

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Introduction

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Every entity exists to provide value for its stakeholders.All entities face uncertainty, and the challenge for

management is to determine how much uncertainty toaccept as it strives to grow stakeholder value.”

COSO Enterprise Risk Management –Integrated Framework

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COSO ERM standard creates a common language

Enterprise risk management:

• Is a process

• Is effected by people

• Is applied in a strategy setting

• Is applied across the enterprise

• Is designed to identify events potentially affecting the entity and manage risk within its

risk appetite

• Provides reasonable assurance to the entity’s management and the Board

• Is geared to the achievement of the entity’s objectives

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Components of an ERM process

Strategy and ObjectiveSetting

EventIdentification

RiskAssessment

Communication & Training

RiskResponse

Risk Reporting

Internal Environment

Monitoring

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King III principles

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• Inseparable from theorganisation’s strategic andbusiness processes

• Determine levels of risktolerance – resilience andapprove policy

• The risk or audit committeeshould assist the board (council)in carrying out its riskresponsibilities

• Management has theresponsibility to design,implement and monitor the riskmanagement plan

• Risk assessments are performedon a continuous basis

• Framework and methodologies areimplemented to increase thepossibility of anticipatingunpredictable risks

• Management considered andimplements appropriate riskresponses

• Continuous risk monitoring bymanagement

• The board (council) should receivecombined assurance regarding theeffectiveness of the riskmanagement process

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Vision

Mission

Achieved by

Objectives Threatened by Strategic Risks Existing StrategicControls

StrategicRisk Register

Divisional Risks ExistingDivisionalControls

DivisionalRisk Register

Internal AuditPlan

Validate Controls

IAReport

Feedback

Feedback

Feedback

Enterprise

Risk Management Framework

Divisional

ObjectivesThreatened by

Evolving focus of risk

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Evolving focus of risk

Over time

Co

mp

lex

ity

Localproduction

OutsourcingOff shoring

Integratedsupply chains

Fire

IT failure

War againstterror

Pandemicflu

Globalwarming

Creditcrunch

What next?

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Benefits of effective enterprise risk management

• Consider risk during strategy and objective setting

• Exploit opportunities

• Understand and proactively manage critical risks impacting objectivesthroughout the organisation

• Identification and implementation of cost effective, integratedresponses to multiple risks

• Enable the Board and management to have a portfolio view of risksacross the entire organisation

• Rationalise resources

• Reduce operational surprises and losses

• Informed decision-making

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Benefits of effective enterprise risk managementcontinued…

• Report with greater confidence

• Support governance responsibilities and satisfy legal and regulatoryrequirements

• Enhanced corporate governance processes and accountability

• Increased internal and external transparency

• Alignment of internal audit focus with the risk profile of theorganisation

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Challenges facing organisations today

• How do we integrate risk management with the business’ strategicdirection and plan?

• What are our principal business risks?

• Are we taking the right amount of risk?

• How effective are our processes for identifying, assessing and managingbusiness risks?

• How confident can I be that the reports I receive fully reflect the business’risk position?

• How is risk coordinated across the business?

• How does the Council and Executive Management help establish the “tone atthe top” that reinforces the company’s values and promotes a “risk awareculture”?

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The Kariba Dam – Case Study

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The Kariba Dam

• Opened in 1959

• ZRA (Zambezi River Authority) manage the dam

• Badly in need of repair

• Lack of maintenance – 56 years later

• Problem identified 10 years ago

• Electricity Generation – 40% of regions capacity

• Region under review:

• Botswana, Malawi, Mozambique, South Africa, Zambia and Zimbabwe

• Total Population in Region – 120 million

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The Kariba Dam

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The Kariba Dam

The Zambezi River

The Zambezi River winds its waythrough six countries in Africa, starting

in northwestern Zambia andfinishing in the Indian Ocean. Thesource lies at about 1,500 metres abovesea level in the Mwinilunga District,very close to the border where Zambia,Angola and the Congo meet.

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The Kariba Dam

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The Kariba Dam

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The Kariba Dam

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The Cahora Bassa Dam

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The Kariba Dam – The Problem

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The Kariba Dam – The Event

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The Kariba Dam – The Impact

Tsunami like wall of water released downstream

4 xBigger

181billion

3.5million

8 hours

334 kms

Tete

10 hours

40%

Electricity

30

Million

WaterFood

Agriculture

EconomicImpact?

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The Kariba Dam – The Risks

• Economic

• Environmental

• Geopolitical

• Societal

• Technological

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The Kariba Dam – Something to think about

• Risk management not simple

• Challenging

• Inter-connectedness

Risk – From which Perspective?

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Questions

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