Risk Management In today’s society risk management has become a requirement to companies instead of a choice. The collapse of several companies due to financial statement fraud over the years has shown companies that no one is immune or protected from having deficient or irrelevant risk management procedures or falling victim to financial statement fraud (Brown, et al., 2009, p. 546). Companies in any type of industry need to protect themselves from financial statement fraud and should have the ability to create a policy with the full recognition of risk and the creation of a relevant set of operating processes so management is able to answer to developing situations as they occur. Shad and Fong-Woon (2015) indicate that company executives 116). A company’s risk management policy can also be seen as a form of governance (p. 116). Campbell notes that risk management can be seen as a form of governance because risk management assists in giving decision-makers the information needed to allow them to assign the necessary means that best balances the incentives and risks of a questionable future (p. 116). According to Minculete and Olar (2014), risk signifies the concern associated with the existence of an event that, when it takes place it changes the achievement of the company’s objectives (p. 102). Therefore, risk is not something that is guaranteed, however when associated with the company objective, which could have an adverse effect (p. (2012) notes that companies need to identify the risks associated to daily activities and establish a measure to acknowledge those risks by establishing a policy of acceptable internal control devices in order to alleviate the chance of the risks arising or the consequences if the risk has already emerged (p. 15). The process of identifying the risks must be consistent and concurrent, incorporated to the company objectives, activities, and processes carried out within the financial and accounting framework (p. 15). Additionally, in order for companies to carry out a successful risk management processes, regardless of the company hierarchy level, all employees and management must be aware of the risk management policy and the importance of the policy in order to assist the company in meeting goals and objectives and to assist in implementing, controlling, and monitoring the policy that is put into place (p. 16). Company executives or upper management must regularly review the risk of company daily activities, create and establish applicable procedures to assist with limiting the chance that a specific risk could occur, in addition to, determining the necessary actions required to incorporate the company objectives within the policy (p.
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