Enterprise risk management in the accounting and finance section of a ministry : assessment tool

Abstract

Enterprise Risk Management (ERM) is an important concept in the public sector as it is in the private one. ERM is about moving from a reactive managerial style to a proactive one and finally to a state where resources are allocated according to risk based priorities in order to ensure that objectives are achieved in the most efficient, effective and economical way possible. The scope of this long essay is that of developing an ERM assessment tool for the Accounting and Finance Section (AFS) of a ministry. The tool should not only help to analyse the maturity level of the section's risk management process but also highlight those areas where the AFS needs to improve its ERM process. This ERM assessment tool follows the principles and guidelines of the International Organisation for Standard - ISO 31 OOO and is built upon the eight components of the Committee of Sponsoring Organisations of the Treadway Commission (COSO), 2004 ERM - Integrated Framework, which are: 1. Internal Environment - the significance and importance that risk management is given within the organisation. 2. Objective Setting translating the organisation's mission statement into strategic objectives. 3. Event Identification - identify internal and external risk occurrences that might affect positively or negatively the organisations objectives. 4. Risk Assessment - risks are analysed and prioritised on the basis of their occurrence likelihood and impact. 5. Risk Response - risk events are address in order to bring them within acceptable risk appetite and tolerance levels. 6. Control Activities management introduces the necessary policies and procedures in order to implement the chosen risk responses. 7. Information and Communication - relevant information is identified, acquired, stored and communicated in the timeframe and format requested. 8. Monitoring - the whole ERM process is continually evaluated and the necessary improvements applied in order to keep it relevant, effective and efficient. This ERM assessment tool is made up of a set of checklists, comprising a different list of elements for each and every ERM component. When these checklists are completed they will provide an aggregate score that will indicate the maturity level of the AFS ERM process which can range from a minimum level of 'Just getting started' to a maximum level of 'Robust ERM in place'.