Enterprise Risk Management From Book to Board Room

Transcription

1 Enterprise Risk Management From Book to Board Room Raghuraman Ranganathan Senior Manager, Corporate Risk Center of Excellence Enterprise Risk Management Wipro Limited

2 What do we have here. 120 Mins..time together This is our T20 and Strategic Timeout How to Make it useful for you & us Lets bowl to each other & not drop catches Our Brief: Get to know how risk management theories can move from Books to Board Room Statutory Warning: This presentation has an overdose of Cricket & Risk. 2

3 Pre-Match History History and Need for Enterprise risk management 3

4 History of Risk Management (this is a video played during the session) 4

5 Stakeholder Need for ERM Uncertainty Risk Opportunity Enterprise Risk Management Framework Risk Minimization framework Opportunity Maximization Entity / Firm Wealth creation Compliance & Assurance for Stakeholders Enterprise Risk Management optimizes risk, Does not eliminate it 5

6 Compliance Need for ERM Sarbanes Oxley HIPAA FERC CA SB 1386 CA SB 1950 PIPEDA Homeland Security Companies Act DPA RIP Basel II IAS Reg.357 Companies Act Sarbanes Oxley Banking Act Japan Privacy SOX FICS Personal Data Protection Law Bill 3494/2000 Bill 321/2004 CLERP 9 AS4360 Personal Data Protection Law - Wipro Global Foot Print 6

7 Customer wants - Business needs Size & Scale of Business Increasingly Strict regulations Robustness of Processes Managing Outsourced Relationships Dynamic Changes Impact of Globalization Mergers & Acquisitions Continuous Compliance Value for every rupee spent 7

8 The Playing Ground Overview The Business Environment in which we operate and our boundaries 8

9 Business Environment Economic Conditions Forex Volatility M&A Corporate Governance & Financial Reporting Physical Security Threats Labor & other Regulatory changes Customer Demands Treasury Business Growth & Delivery Regulatory Compliance Country Policies Technology Customer Credit People Supply Chain Climate Change & Sustainability Customer Delinquency Taxation External Risks Internal Risks 9

10 Global Risks 2011 World Economic Forum Top Risks 1. Fiscal Crises 2. Climate Change 3. Extreme Energy Price Volatility 4. Economic Disparity 5. Global Governance Failures Source: 10

11 The Toss Concepts Internal Vs External 11

12 Global Risk Management Standards 1.The Orange Book; Management of Risk - Principles and Concepts, 1 st edition:2001 by HM Treasury, Edition used: October ISO/FDIS 31000; Risk Management Principles and Guidelines, by International Organization for Standardization, Edition used: November AS/NZS 4360:2004; Risk Management, 1 st edition: 1995, by Joint Technical Committee OB-007, Risk Management, Edition used: June COSO; Enterprise Risk Management Integrated Framework, First Edition: 2001, Edition used:

13 COSO ERM Framework Three Foundational Aspects: 1. Achieving Entity Objectives: Wipro s approach of 5 Risk Areas Strategic Operations Financial Reporting Compliance 2. Applies to activities at all levels of the organization 3. Eight interrelated components 13

14 Risk Management Methodology Strategic Operational Financial Compliance Scope Nature Owner Quantification Tolerance Treatment Qualitative Quantitative Risk Estimation Vs. Risk Appetite Internal External Risk Control / Mitigation (Avoid/Transfer/Finance) Audits Reporting & Reviews Source : Risk Management Standard, IRM 14

15 If You thought that was a theory ERM is Virtually What managers do on Every-day Basis 15

16 Risk Management is Evolving From: Finance function Financial risks Risk insurance Treasury risks Exchange risks To: Entire enterprise Operations Finance Technology Human resources Competition Regulatory Environmental Global expansion Reputation 16

17 Risk Interconnection & Cascading effect Problem: Two low impact risk occurring simultaneously can have devastating effect on the system. Response: To NOT look at risks in isolation. A Scenario analysis to be done by looking at risks in conjunction. + = 55 million people out of power for 10 hours A transmission line touching tree Security incident or delivery issue A bug in the IT system + + = Change in customer management 1 plus 1 can be 11 in their impact and not just 2! Contract renegotiation 17

18 Wipro Specific Risk Management Areas (Discussed during the Session Not included in this deck as Wipro Confidential) 1) Wipro ERM Strategic Plan 2) ERM Framework and Architecture 3) Integrated Risk Management at Wipro 4) Risk Management philosophy to act fast on weak signals 5) Board and Audit, Risk and Compliance Committee role on risk management at Wipro 6) Deal risk index model 7) Customer credit risk assessment model 8) Country risk assessment model 9) Alliance partner risk assessment model

19 Opportunities for CAs 1) Evolving Maturity models for Enterprise risk management 2) Industry specific risk management models 3) Risk Management training for Corporates 4) Joint IP development models 5) Risk Management Automation rollouts 19

20 Thank You! 20