By Arina Smith
Risk management is the core of the financial world of any organization. It has several steps that make up the process and it is important to have a proper workflow ensuring the implementation of each aspect in the firm. The aspect of risk management being discussed here is Risk reporting. Risk identification, assessment, and response take place on a day-to-day basis via internal audits. The data collected in turn is organized and reported at least on a quarterly basis if not monthly. This activity is meant to reach out to the various key stakeholders both within and outside an organization and conveying the outcomes of the risk assessment through internal audits. The reporting can be done in any written form of documentation and strictly not through verbal communication.
For any organization, the most common types of risk management techniques include risk avoidance, risk mitigation, risk transfer, and risk acceptance. Hence, the major types of risk reporting also depend upon these risk factors and management techniques.
Accurate risk reporting serves as the saving grace
As discussed above, accurate risk assessment can all go in vain if it is not reported to the stakeholders in a formal manner at the appropriate time. Doing so can help the authorities to steer the organization with the right tools, key insights, and choices to effectively make proper decisions. There are several types of risk reporting areas and are classified on the basis of which aspect of management is being examined like operational, financial or any special matter like investigations. The report should be a formal document complete with table of contents, executive summary, detailed description of the risks as well as appendices. Some major types of risk reporting are discussed below.
Operational risk reporting
Let’s start by defining operational risks. These are the risk of loss that might occur due to an inadequate or failed internal process, people and systems or from external events and includes legal risk. The operational risks are identified during the internal audit and are reported further by the program manager. This category can be further classified into project risk reporting and program risk reporting. Basically these categories entail the identification and reporting of the risks at the project level and at the program or department level. For example, factors like changes in the price of certain key raw materials, risk of unavailability of the material required for the project and the risk of the suppliers not being able to complete their job fall under any given project. Whereas, overlapping dependencies between two projects within a program should be mentioned in the program risk report.
Financial risk reporting
The most basic outcome expected from financial risk reporting is the financial position of the firm on any specific date. The management and authorities responsible for internal audits must represent the risks in a precise manner. The financial risk reporting accounts for and should provide the information in a clear, concise and easily underwood manner that facilitated quick, informed decisions. This helps the firm to track cash flow and debt the evolving financial position of the firm. The financial risk report must be distributed regularly to the managers and regulators as it might help both internal and external stakeholders.
Special risk reporting
This is the kind of reporting that is done on special request from the top management. These may include internal audits across various departments and look into some specific problems. These reports might serve as an investigative finding of the cause or solution to a particular problem or can identify loopholes in the system.
Other kinds of risk reporting
As mentioned above, the risk reports for any organization are a way of communicating project and business risks to the concerned stakeholders. Over and above, the risk reporting included in the above paragraphs, the following are also known and required kinds of risk reporting.
Project risk reporting:
It usually includes organizational risks pertaining to the scope of the project work, and external factors that may impact the project in some or other way.
Program risk reporting:
Program managers mostly use program risk reports that are created by the program team. The frequency of such risk reporting is determined by the program management framework.
Avoid the forthcoming risks through proper assessment and reporting
Risk management plays a huge role in keeping any company afloat and risk reporting a key element of the practice. Always keep yourself and the firm updated by reporting any and all different kinds of risks that might come your way from any direction. Inappropriate risk reporting can create a lapse in judgments due to hasty and haywire last-minute solutions to the problems. Arm yourself with a strong and thorough internal audit team and get the risks reported as soon as they are identified to avoid any devastating effects on the organization.
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