Business entity risk exposures

[Yakub02]

Management commentary may help users to understand:

 the entity’s risk exposures, its strategies for managing risks and the effectiveness of those strategies;

 how resources that are not presented in the financial statements could affect the entity’s operations;

 how non-financial factors have influenced the information presented in the financial statements. Management commentary should:

 provide management’s view of the entity’s performance, position and development;

 supplement and complement information presented in the financial statements; and

 be orientated to the future. The relevant focus of management commentary will vary with facts and circumstances but a decision-useful management commentary should include information that is essential to an understanding of:

 the nature of the business;  management’s objectives and strategies for meeting those objectives.

Risk management A company may be exposed to a wide range of risks which might affect its ability to achieve its corporate objectives.

Risk management is a corporate governance issue.

A board should safeguard the assets of the company and protect the shareholders’ investment from a loss of value. In order to achieve this, the board should manage risks.

The publication of information on risk management activities enable shareholders (and other stakeholders) to evaluate the importance that a company attaches to risk management and its effectiveness in managing those risks identified as significant.

Risk reports help boost shareholders’ confidence that the company has adopted a responsible attitude towards risk. ICGN Corporate Risk Oversight Guidelines The International Corporate Governance Network (ICGN) has issued guidelines on responsibilities for the oversight and management of corporate risk (2010).

 

[Holicent]

The potential threats or vulnerabilities that a business entity faces in its day-to-day operations are referred to as business entity risk exposures. Market conditions, economic factors, legal and regulatory requirements, technological advancements, and internal operational issues are all potential sources of these exposures.

Instances of business element risk openings include:

Credit risk, liquidity risk, market risk, and operational risk are examples of financial risks.

Risks related to laws and regulations, such as breaking them, getting into legal trouble, and infringing on intellectual property.

Risks to a company's reputation, such as negative publicity, a decline in customer confidence, and harm to the brand's image.

Competitiveness, shifts in market dynamics, and innovation are examples of strategic risks.

Risks related to operations, such as disruptions in the supply chain, malfunctions in equipment, and cyberattacks.

Businesses can come up with plans and put them into action by figuring out and evaluating these risk exposures.