Risk Management used to be merely a wing that purchases insurance for multi-million dollar companies. Over the years Risk Management has begun to evolve and play a more strategic role within a company. This evolution is evidenced by companies’ adoption of Enterprise Risk Management (ERM) philosophies integrating them throughout organizations. One example of such integration is the relationship that is developing between Internal Audit and the Risk Management departments.
An article that appeared on the Business Insurance website outlines this blossoming relationship. The article was written by The Institute of Internal Auditors (IIA) IIA in response to a collaborative report that was composed by Risk and Insurance Management Society (RIMS) and the IIA. The report was released to coincide with the RIMS annual conference in April and provided case studies for risk aware organizations like Cisco Systems and the Whirlpool Corporation. Carol Fox, who is the director of strategic and enterprise risk practices at RIMS, is quoted as saying that the role of internal audit and risk management are complimentary and would be “more effective working together than separately.”
This common understanding is something that The ALS Group whole-heartedly agrees with because to us the internal audit’s function is to determine the financial impact of risk on the companies’ operations. This essential tool can be used to improve the effectiveness of risk management within an organization. Therefore, if a company begins to incorporate Enterprise Risk Management into its philosophy, Internal Audit department can use this process to evaluate the effectiveness of a company’s risk management systems. This symbiotic relationship will than allow a company to look at risk from a more strategic view that examines a company’s profitability and will provide a deeper understanding of its significant risks.
To get more information on integrating Enterprise Risk Management into your company’s internal audit function, contact our Managing Principal, Albert Sica at 732.395.4251 or at [email protected].
To read the Business Insurance article referenced above, click here.
