Risk Management Reports Preparation

Risk Management Reports Preparation

Risk management is one of the modern management systems that business entities must adopt and operate under. The implementation of a risk management system has a comprehensive framework, and the final stage within this framework is the preparation of risk management reports.

The preparation of risk management reports is the responsibility of risk management departments in business entities, and these reports are presented to the Risk Management Committee (RMC), which in turn submits them to the Board of Directors (BOD).

The importance of risk management reports lies in identifying the general risk environment and reporting on it at an early stage, allowing for control before these risks become highly probable.

Why do risk management departments in business entities need to seek assistance from a specialized consulting firm for the preparation of risk management reports?

The preparation of a risk management report requires professionals who specialize in risk management. This report should add value to the business entities, as it includes a summary of all the risks that the organization may face, along with assessments of the impacts of those risks, controls, and the determination of risk tolerance that can be accepted without significantly affecting the operational results or ownership rights of the business entity.

What are the benefits of outsourcing the preparation of risk management reports to a consulting firm?

There are several benefits of outsourcing the preparation of risk management reports to a consulting firm. These benefits include:

  1. Expertise and Specialization:

    Consulting firms specializing in risk management possess the necessary expertise and specialization in this field. They can provide specialized guidance and deep knowledge of best practices and modern approaches for risk management.

  2. Independent Assessment:

    Consulting firms can offer an independent assessment of the risks and threats facing the business entity. This can be valuable in avoiding bias or impractical assessments.

  3. Time and Effort Saving:

    Preparing risk management reports requires significant time and effort. Engaging a consulting firm can enhance the efficiency of business entity, allowing the risk management team to focus on other core tasks.

  4. Regulatory Compliance:

    In many industries, there are strict regulatory requirements related to the submission of risk management reports. Consulting firms can assist companies in ensuring they comply with all these requirements and provide suitable reports to relevant authorities.

  5. Improved Decision-Making:

    Risk management reports provide crucial information for making strategic decisions. Consulting firms can analyze this information and provide guidance to senior management on how to effectively deal with risks and make the right decisions.

In general, specialized consulting firms in preparing risk management reports help enhance an entity’s ability to effectively deal with challenges and risks and improve overall business performance.

How mandatory is it for business entities in Kuwait to prepare risk reports?

Listed companies in Kuwait Stock Exchange (also known as – Boursa Kuwait) and companies licensed by the Capital Markets Authority (CMA) are required to prepare risk management reports. Globally, these entities are required to prepare risk management reports on a semi-annual basis.

On a local level, the Executive Bylaws of Law No. 7 of 2010 regarding the Establishment of the Capital Markets Authority, Module Six, Article 4-4, emphasize the necessity for companies to prepare risk management reports on a semi-annual basis. The article states:

The risk management officer shall submit a risk report to the Board of Directors every six months, with a copy provided to the Authority. The Board of Directors shall inform the Authority immediately of any breaches of risk management systems and explain the procedures to be followed to address them.

What is the added value to business entities from preparing risk management reports?

  1. Improved Decision-Making:

    Risk management reports provide accurate and systematic information about the threats and opportunities facing the business entity. This information enables executive management to make better and more informed strategic decisions.

  2. Enhanced Business Sustainability:

    By identifying and effectively managing risks, business entities can reduce the impact of risks on their performance and long-term sustainability.

  3. Compliance Achievement:

    Risk management reports assist companies in complying with regulatory requirements and industry-specific applicable laws. This can reduce the risk of legal violations.

  4. Increased Trust of Investors and Customers:

    When a business entity demonstrates that it follows good practices in risk management, it can increase the trust of investors and customers in the entity.

  5. Cost Reduction:

    With a better understanding of risks and opportunities, the business entity can identify areas that need improvement or restructuring, thereby reducing unnecessary costs.

  6. Enhanced Internal Controls:

    Preparing risk management reports helps enhance internal control systems within the company, protecting it from fraud and misconduct.

  7. Reputation and Brand Enhancement:

    Business entities that manage risks effectively and operate with integrity earn a positive reputation and strengthen their brand.

  8. Improved Planning and Strategy:

    Risk management reports can assist in improving the planning process and developing strategies that take potential risks into account. In general, preparing risk management reports can significantly contribute to enhancing the performance and effectiveness of the business entity and ensuring its long-term sustainability.

What are the services provided by Baker Tilly Kuwait?

Preparation of periodic risk management reports.