Pursuing Global Alignment of Risk Management Guidelines


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Presentation by Vincent Tophoff, IFAC, September 24, 2013 , Chicago, Illinois

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Pursuing Global Alignment of Risk Management Guidelines

  1. 1. Pursuing Global Alignment of Risk Management Guidelines Vincent Tophoff, International Federation of Accountants (IFAC) COSO, IFAC, ISO, RIMS, and ROGB Panel Discussion and Networking Event Chicago September 24, 2013 Page 1 | Confidential and Proprietary Information
  2. 2. International Federation of Accountants The International Federation of Accountants (IFAC) is: • The global organization of the accountancy profession • 164 member bodies and associates in 125 countries • 2.5 million professional accountants in public practice, commerce, industry, financial services, the public sector, education, and the not-for-profit sector • Public interest focused More than half are in this box. We call them PAIBs and the PAIB Committee exists to support them Page 2 | Confidential and Proprietary Information
  3. 3. International Federation of Accountants What IFAC does: • Establish and promote adherence to high quality professional standards • Further adoption and implementation of standards • Support the global development of the accountancy profession • Provides a global voice and promotes the value of professional accountants worldwide • Helps its members support professional accountants in business and small and medium practices Page 3 | Confidential and Proprietary Information
  4. 4. Professional Accountants in Business • Supports professional accountants in following areas: – Governance and ethics – Risk management and internal control – Sustainability and corporate responsibility – Financial and performance management – Business reporting – Promoting and contributing to the value of professional accountants • All areas of critical importance to professional accountants (and for risk managers too…) Page 4 | Confidential and Proprietary Information
  5. 5. Bad vs. Good RM/IC Practices There has been an overwhelming load of bad practice: – RM/IC as objective in itself vs. RM/IC to achieve objectives – Auditor / staff driven vs. Board and management driven – Rules-based vs. Principles-based – Of the shelf systems vs. Tailor made – Focused on threats only vs. Also focused on opportunities – Mainly hard controls vs. Social / human aspects – Artificially implemented vs. Organically implemented – Stand-alone / “bolt-on” vs. Integrated / ”built-in” – Static, out-of-date vs. Dynamic, evolving – Creates costs vs. Creates results / value – Abandoned vs. Supported Page 5 | Confidential and Proprietary Information
  6. 6. Global Crisis • Global Crisis, according to IFAC research, caused by: – Ethical flaws – Governance, RM/IC in name, but not in spirit – Regulatory overload, leading to legalistic compliance – Risk & control systems too narrowly focused on only financial reporting controls • Conclusions from the crisis: – Organizations should take a broader approach in risk management and internal control – Appropriate application of risk management and internal control standards and principles is often the problem Page 6 | Confidential and Proprietary Information
  7. 7. Emerging Trends Respondents to the IFAC Global Survey on Risk Management & Internal Control recommended the following : • Emphasize the benefits of (more integrated) risk management and internal control • Bring various risk management and internal control standard setting organizations (e.g., COSO, ISO 31000, the Risk Oversight & Governance Board, etc.) and their guidelines closer together • Collaborate with experts on developing practical application guidance for (integration of) risk management & internal control Page 7 | Confidential and Proprietary Information
  8. 8. COSO ERM vs. ISO 31000 Many entities use both COSO ERM & ISO 31000… COSO ISO 31000 Too short, however, to really understand Lengthy vs. Short Focused on ERM vs. General approach to managing risk One cube vs. Framework and process Skewed to negative vs. Risk can be positive or negative Risk already exists vs. Risk tied to achieving objectives Risk & opportunities vs. Opportunities also source of risk More sequential process vs. More iterative process … Biggest challenge is that concepts not aligned Page 8 | Confidential and Proprietary Information
  9. 9. Next step > Further Global Alignment of Guidelines • IFAC facilitates further global alignment of risk management and internal control guidelines • Through bringing various risk management and internal control standard setting organizations (and their guidelines!) closer together • As per the outcomes of our survey! • And now over to you… Page 9 | Confidential and Proprietary Information
  10. 10. • For further information please contact: • Vincent Tophoff at vincenttophoff@ifac.org • Visit www.ifac.org Page 10 | Confidential and Proprietary Information