Secret Risk Management Buzzwords Revealed

Welcome to the world of risk management or what is sometimes now called enterprise risk management or ERM.

For someone looking for a reference to concepts used in the past or for the newly designated risk expert, you will see elements of enterprise risk management in some of the concepts below. You may have been part of:

  1.  Contingency planning,
  2.  A due diligence review,
  3.  An acquisition review,
  4.  A merger and acquisition review,
  5.  An operational assessment
  6.  A strategic facilitated top management session in this approach, or
  7.  Risk management.

 Using a common source for definitions from Business Dictionary, think of these concepts as:  

Acquisition planning coordinates the activities of the personnel involved in the purchase of an asset or supply to ensure its timely and cost effective acquisition.  

Contingency planning is activity undertaken to ensure proper and immediate follow-up steps will be taken by a management and employees in an emergency. Its major objectives are to ensure:

(1) containment of damage or injury to, or loss of, personnel and property, and

(2) continuity of the key operations of the organization.  

Due diligence is a measure of prudence, responsibility, and diligence that is expected from, and ordinarily exercised by, a reasonable and prudent person under the circumstances.  

Operational assessment is an evaluation of working effectiveness and suitability of a system through test methods aimed at:

(1) identification of defects, gaps, areas of risk,

(2) measurement of the adequacy of the output, and

(3) assessment of the reliability of the operations.  

Risk management includes policies, procedures, and practices involved in identification, analysis, assessment, control, and avoidance, minimization, or elimination of unacceptable risks. A firm may use risk assumption, risk avoidance, risk retention, risk transfer, or any other strategy (or combination of strategies) in proper management of future events.  

Often the new expert in a function has to obtain a working knowledge of the buzzwords and industry jargon as one of their first steps. If you are the new enterprise risk management expert, or risk management expert, you will see these terms regularly.

Bottom line? – Stop Profit Leaks Now. Apply this information to improve your profitability, re-engineer business models, and strengthen or gain competitive advantage in the marketplace.

Or comment on how this article could be made more useful for you.

And apply the free Fiscal Test available at http://fiscaldoctor.com/fiscaltest.html.

From the author of the forthcoming book, ‘Stick Out Your Balance Sheet & Cough: Best Practices for Long Term Business Health’.

From Gary W Patterson, http://www.FiscalDoctor.com Copyright 2009

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Revealed – What Does a Controller Really Do? Best Practice Secrets Highlighted

Once the mission and vision are tweaked, Chief Executive Officers (CEO) and other executives are faced with the issue of implementing the new plan. Often that requires extensive help from accounting or finance. Since a number of CEOs, panel creators, and others ask what is the difference between a Chief Financial Officer (CFO) and controller and bookkeeper, you can start with a look at a more detailed definition of a controller.

We will begin with what to expect from the levels of the accounting staff. For the purposes of this discussion, the following will serve as definitions of two of the top players in the accounting department:

Chief Financial Officer -Person who makes the financial statements understandable. This person ranges from a true business partner to a technician.

Controller – Is the working manager for the accounting department. This person ranges from someone on the CFO track to a technician.

Controllers also have highly specialized duties that require a variety of multitasking skills. Again, a person in this position should be able to cover but is not limited to the following tasks:

Controller Duties:

o Manages bookkeeper

o Handles Executive Payroll

o Can sign checks prepared by bookkeeper

o Signs Sales Tax returns

o Creates the more difficult journal entries

o Prepares Financial Statements

o Approves customer credit limits

o Is responsible for payroll processing

o Implements basic financial and accounting systems

o Can coordinate with external Certified Public Accountant (CPA) on tax returns, compilations or audits

o Implements polices and procedures

o Creates non standard reports, including variance reviews

o Handles insurance and risk management with assistance

o Begins safeguarding assets

o Creates budgets

o Inventory overview with assistance

Think of this as a common sense list of how you want to see how this key team member will help you execute strategic programs or processes like: risk management process, enterprise risk management ( ERM), strategic planning, risk assessment, risk management assessment, entire enterprise risk management assessment, operational review, due diligence, or scenario budgeting.

The opportunities you may create from improving your company resources may open up some incredible opportunities for you with competitors whose companies have a weaker management team.

Bottom line? – Risks are what really go wrong when you are not looking: stupid things like bounced checks, losing your best customers or best people when you are blindsided.

You need a perspective of business under the microscope and to have lived to tell the tale. After analyzing and helping over 200 companies, I have learned one key point:”What You Don’t Know About Your Business Can Cost You Your Business.”

From the author of the newly released book, ‘Stick Out Your Balance Sheet & Cough: Best Practices for Long Term Business Health’. Available on Amazon. So open this book and say Profit.

A video of Gary discussing his book is available at http://www.youtube.com/watch?v=OXhsY8hP70A.

From Gary W Patterson, FiscalDoctor http://www.FiscalDoctor.com. Copyright 2010.

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