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Guidance note on risk management

GUIDANCE NOTE ON RISK MANAGEMENT CB M SHARMA PRESIDENT THE INSTITUTE OF COST AND WORKS ACCOUNTANTS OF INDIA Established by an Act of Parliament Sudder Street Kolkata- Phones - - - - Fax - - - E-mail president icwai org Website www icwai org Foreword Across the world Risk Management has increasingly become integral to the management of businesses In our country while awareness of the need for proactive risk management is growing steadily actual progress has been limited However our country is moving rapidly up a growth curve in an increasingly borderless and turbulent world While competitive forces compel focus on ??better faster lower cost ? steering a business in this exciting scenario requires a thorough understanding of risks and their mitigation Members of our Institute have always played an active role in assisting managements to meet the expectations of their stakeholders The prime demand from stakeholders is improvement in returns with minimum volatility E ?ective management of risk is a prerequisite to meet this need This Guidance Note provides a comprehensive overview of the subject and will enable our members to play a complimentary role in enabling organizations to meet their stakeholders ? expectations It is heartening to note that the Professional Development Committee of our Institute has brought out this Guidance Note as our Institute ? s continued contribution towards enabling our Members to enrich their organizations and remain contemporary with world trends I place on record by sincere appreciation to Shri Kunal Banerjee Chairman of the Professional Development Committee and to all the members of the Committee for overseeing the preparation of this publication and to Shri Prodipto Banerjea our member who has authored it I also thank the PD Directorate and Studies Directorate for their contribution in bringing out this publication timely I hope the Regional Councils and Chapters will come forward to conduct programmes to enable all our members to develop the required competence in this area With Best wishes B M Sharma President th July CKUNAL BANERJEE Chairman Professional Development Committee THE INSTITUTE OF COST AND WORKS ACCOUNTANTS OF INDIA Established by an Act of Parliament Sudder Street Kolkata- Phones - - - - Fax - - - E-mail banerjee kunal gmail com Website www icwai org Preface The process of Risk Management was formally introduced by SEBI for all listed companies by revising Clause of the listing agreements with the stock exchanges As a result with e ?ect from December it became necessary for every listed company to meet the following requirement - ??The company shall lay down procedures to inform Board members about the risk assessment and minimization procedures These procedures shall be periodically reviewed to ensure that executive management controls risk through means of a properly de ?ned framework ? While management of business invariably necessitates management of risks formal processes were absent and silo based activities was the norm The SEBI intervention requires a comprehensive approach which has been delineated in this Guidance Note A detailed overview has been