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RISK MANAGEMENT INTERNAL CONTROL AND EVERYDAY LIFE
By Kastuv Ray
Introduction
Risk Management is not rocket science.
Many organizations are using the risk register to drive the Strategic Internal Audit Plan. Listed below are some examples of how we address risk in our everyday lives. The example is listed first, followed by the possible risks and then the controls.
Example 1: Nights Out
Many of us go out and have a good time at the weekend. For some, this involves drinking large quantities of alcohol. We are sometimes faced with the question “Should we drive to the place of leisure or not?” The risks listed for this example cover both the initial thought prior to the event and the risks that are posed if we do drive when we are drunk.
Possible Risks:
· Not being able to concentrate properly whilst driving, therefore posing a risk to ourselves, and endangering the lives of our passenger(s), pedestrians and fellow drivers.
· There is a risk of being stopped by the police and being breathalyzed. This would lead in turn to a prosecution or fine. There is also a risk to our reputation.
Possible Controls:
· Don’t go out at all and stay at home and rent a video.
· Don’t take the car and use public transport instead.
· Don’t drink.
· Let someone else who hasn’t drank too much, do the driving.
· If you take the car and if you have drank too much, leave it where it is and take a taxi or public transport. (However, there is always the risk that it may not be there when you look for it in the morning.)
Example 2: Use of a Credit Card
It is sometimes said that accountants are the worst people to look after their own finances. In this example, Mr. X has a credit card and continuously spends money buying suits and other things.
Possible Risks:
· Too much debt is built up too soon and it becomes difficult to manage.
· High interest rates.
· Poor credit profile
Possible Controls:
· Cut up the credit card and throw it away.
· Don’t spend too much.
· Budget
· Save
Example 3: The Escaping Cat
Suppose that you have recently moved house and have a cat called Rupert.
Also suppose that at your old house, Rupert had a lot of places to hide in the garden. The garden in the new house is flat and there are no places to hide. One day, you walk into the kitchen and Rupert has cleaned his whole plate of food (which is unusual for him – what is he up to?) Suppose also that you don’t let him out the front much because you are scared as to what might happen to him (particularly as he is a beautiful white cat). One day, you let Rupert out into the back garden and he claws himself up the wooden fence, walks across the top (unusual for him as he can’t usually hold his balance) and he jumps into the next garden. Suppose that the next-door neighbor has not moved in yet, and Rupert burrows his way out under the gate to the outside. You may be wondering where Rupert is and find him outside running around. In this example, Rupert is a slightly mad, moody and naïve cat.
Possible Risks:
· If you let Rupert out into the garden, he may try and run away. Some cats tend to go AWOL after their owners move to a new place.
· Rupert may encounter a situation that he cannot handle, for example, if there is a workmen site close by with new houses being built.
· Rupert may start whining.
· Rupert may attack the owners for not letting him do what he wants.
Possible Controls:
· Give Rupert something else to do, for example build an obstacle course in the garden.
· Don’t let him go outside.
· Let him go outside but keep an eye on him.
· Block up the open part of the neighbor’s gate (this may lead to problems with your neighbor).
Conclusion
Remember these examples, if you are faced with deciding what the risks are to your organization or if you have to undertake a presentation on Strategic Risk Management.
