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Case study 1: Ubuntu Holdings (Pty) Ltd
1. What are the key components of an ERM framework that Ubuntu Holdings should
implement?
Governance
The governance component forms the backbone of an effective Enterprise Risk Management (ERM)
framework. For Ubuntu Holdings, it is essential to establish clear direction and oversight from both
the board and senior management. This component ensures the creation of an organizational
structure that allocates responsibilities for risk management across various levels of the company. A
strong risk culture must be fostered, ensuring that all strategic decisions, such as entering new
markets or launching products, are aligned with risk considerations. The governance structure should
also outline how risks will be identified, assessed, monitored, and managed, typically through a
"three lines of defence" model involving business line management, risk oversight, and independent
assurance functions.
Operational Risk Policy
Ubuntu Holdings should implement a formal operational risk policy that has been approved by the
board to guide its risk management practices. This policy would define operational risk, set out the
company's risk appetite, and provide an overview of the risk management processes. Furthermore, it
should clearly allocate roles and responsibilities within the company to ensure that all stakeholders
understand their role in managing operational risks. The policy will act as a reference for employees,
ensuring that the approach to risk management is communicated consistently and effectively across
all departments.
Operational Risk Appetite
Defining the operational risk appetite is crucial for guiding strategic decision-making at Ubuntu
Holdings. This component determines the level and type of risk the company is willing to take to
meet its objectives. The risk appetite, which needs approval from the board, will help in resource
allocation and will influence the company’s overall risk culture. It can be articulated through
monetary loss thresholds, key risk indicators (KRIs), and key control indicators (KCIs), ensuring that
the company operates within acceptable risk limits while striving to meet its strategic goals.
Risk and Control Assessment
A comprehensive risk and control assessment process is vital for identifying, assessing, and
monitoring the risks faced by Ubuntu Holdings. This process involves evaluating risks and
implementing controls to mitigate them. Risk assessments should be linked to the company’s
strategic objectives and operational activities to ensure that they are relevant and effective in
managing both existing and emerging risks. The assessment can be qualitative (e.g., categorizing
risks as high, medium, or low) or quantitative (e.g., estimating financial impact), providing a
thorough analysis of the company's risk profile.
Events and Losses
Tracking and analyzing risk events and associated losses is a critical part of the risk management
process. Ubuntu Holdings should develop a system for recording risk events, investigating their
causes, and taking steps to prevent their recurrence. This component also involves using internal and
external loss data to refine risk and control assessments, identify key risk indicators, and develop
relevant scenarios. Learning from past events and losses can help the company strengthen its risk
management practices and prevent similar issues in the future.
Case study 1: Ubuntu Holdings (Pty) Ltd
1. What are the key components of an ERM framework that Ubuntu Holdings should
implement?
Governance
The governance component forms the backbone of an effective Enterprise Risk Management (ERM)
framework. For Ubuntu Holdings, it is essential to establish clear direction and oversight from both
the board and senior management. This component ensures the creation of an organizational
structure that allocates responsibilities for risk management across various levels of the company. A
strong risk culture must be fostered, ensuring that all strategic decisions, such as entering new
markets or launching products, are aligned with risk considerations. The governance structure should
also outline how risks will be identified, assessed, monitored, and managed, typically through a
"three lines of defence" model involving business line management, risk oversight, and independent
assurance functions.
Operational Risk Policy
Ubuntu Holdings should implement a formal operational risk policy that has been approved by the
board to guide its risk management practices. This policy would define operational risk, set out the
company's risk appetite, and provide an overview of the risk management processes. Furthermore, it
should clearly allocate roles and responsibilities within the company to ensure that all stakeholders
understand their role in managing operational risks. The policy will act as a reference for employees,
ensuring that the approach to risk management is communicated consistently and effectively across
all departments.
Operational Risk Appetite
Defining the operational risk appetite is crucial for guiding strategic decision-making at Ubuntu
Holdings. This component determines the level and type of risk the company is willing to take to
meet its objectives. The risk appetite, which needs approval from the board, will help in resource
allocation and will influence the company’s overall risk culture. It can be articulated through
monetary loss thresholds, key risk indicators (KRIs), and key control indicators (KCIs), ensuring that
the company operates within acceptable risk limits while striving to meet its strategic goals.
Risk and Control Assessment
A comprehensive risk and control assessment process is vital for identifying, assessing, and
monitoring the risks faced by Ubuntu Holdings. This process involves evaluating risks and
implementing controls to mitigate them. Risk assessments should be linked to the company’s
strategic objectives and operational activities to ensure that they are relevant and effective in
managing both existing and emerging risks. The assessment can be qualitative (e.g., categorizing
risks as high, medium, or low) or quantitative (e.g., estimating financial impact), providing a
thorough analysis of the company's risk profile.
Events and Losses
Tracking and analyzing risk events and associated losses is a critical part of the risk management
process. Ubuntu Holdings should develop a system for recording risk events, investigating their
causes, and taking steps to prevent their recurrence. This component also involves using internal and
external loss data to refine risk and control assessments, identify key risk indicators, and develop
relevant scenarios. Learning from past events and losses can help the company strengthen its risk
management practices and prevent similar issues in the future.
