Organizational Structure of Risk Management

Risk management demands financial savvy.

An organization typically implements a risk management strategy to ensure that employees abide by industry practices, regulatory guidelines and corporate policies when performing tasks. An adequate organizational structure increases the probability that risk management procedures will be successful.

Identification

Risk management consists of the procedures, tools and approach that an organization uses to identify, assess, monitor and remedy risks implicit in its operating activities. Operating risks include market, credit and technology risks.

Features

A company's top leadership provides a broad vision for the risk management approach that the company must follow when appraising operating risks. Senior management and corporate audit or risk committee members direct departmental heads to develop proper risk control procedures based on business conditions.

Departmental Procedures

Department heads generally formulate risk management policies to which personnel must conform when completing tasks, according to the World Bank's International Finance Corporation. Departmental risk guidelines help segment chiefs tailor specific procedures for their business units.

Segment-Level Guidelines

Segment-level guidelines are procedures that supervisors put into place to prevent operating losses and ensure that workers abide by top management's stipulations when carrying out duties.

References

• International Finance Corporation: Organization of Risk Management Framework in Banks--Key Principles