How does an organization determine the right amount of risk for the value it is trying to create for stakeholders, and how should it communicate its risk policy to stakeholders?
• The level of risk that an entity is willing to accept is a management decision – and there is no right answer to this question. One company’s management will pursue a higher-risk strategy while another will pursue a lower-risk strategy. The shareholder should understand the risk chosen by management and invest in accordance with his/her own tolerances for potential variation in stock performance. Organizations communicate the levels of risk accepted through the MDA, quarterly and annual reports, press releases, investor calls, etc. What is the relationship between effective enterprise risk management and improved financial reporting and transparency? • There are natural linkages between enterprise risk management, improved financial reporting and transparency. The Enterprise Risk Management – Integrated Framework requires that organizations establish a risk appetite, measure actions and decisions against that risk appetite, and communicate results. Communication of enterprise risk ma
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