RSK2601
S2 2023
LESSON 1
Expansion strategies can increase a business’s risk exposure
Because of the diversity of risk exposures, risk management requires a broader approach.
The benefits of effective risk and opportunity management include the following:
Improved cost certainty
Higher economic returns
Sustainable shareholder value
Increased stakeholder confidence
Reduction of costly disputes and claims
The board’s role is to steer the corporation towards corporate governance policies that support long-
term sustainable growth in shareholder value. The board should:
Eliminate policies that promote excessive risk-taking for the sake of short-term increases in stock
price performance;
1
,RSK2601
S2 2023
Establish compensation plans that align goals to long-term value creation, taking into consideration
incentive risks;
Ensure that appropriate risk management systems are in place to avoid excessive risk taking, and
Comprise primarily independent, diverse members, as such a composition is helpful in assessing a
business’s risk profile
2
,RSK2601
S2 2023
What is ERM
3
, RSK2601
S2 2023
BENEFITS OF ERM
Enterprise risk management provides enhanced capability to:
Increase the likelihood of a business realising its objectives.
Build confidence in stakeholders and the investment community.
Comply with relevant legal and regulatory requirements.
Align risk appetite and strategy.
Improve organisational resilience.
Enhance corporate governance.
Embed the risk process throughout the organisation.
4
S2 2023
LESSON 1
Expansion strategies can increase a business’s risk exposure
Because of the diversity of risk exposures, risk management requires a broader approach.
The benefits of effective risk and opportunity management include the following:
Improved cost certainty
Higher economic returns
Sustainable shareholder value
Increased stakeholder confidence
Reduction of costly disputes and claims
The board’s role is to steer the corporation towards corporate governance policies that support long-
term sustainable growth in shareholder value. The board should:
Eliminate policies that promote excessive risk-taking for the sake of short-term increases in stock
price performance;
1
,RSK2601
S2 2023
Establish compensation plans that align goals to long-term value creation, taking into consideration
incentive risks;
Ensure that appropriate risk management systems are in place to avoid excessive risk taking, and
Comprise primarily independent, diverse members, as such a composition is helpful in assessing a
business’s risk profile
2
,RSK2601
S2 2023
What is ERM
3
, RSK2601
S2 2023
BENEFITS OF ERM
Enterprise risk management provides enhanced capability to:
Increase the likelihood of a business realising its objectives.
Build confidence in stakeholders and the investment community.
Comply with relevant legal and regulatory requirements.
Align risk appetite and strategy.
Improve organisational resilience.
Enhance corporate governance.
Embed the risk process throughout the organisation.
4
