Application: Risk Management in Emerging Markets Emerging markets pose different

Question

Application: Risk Management in Emerging Markets

Emerging markets pose different challenges from operational to financial risks; yet emerging markets often reveal possibilities for diversification and economic growth. How might an organization considering operations in an emerging market alter its risk management framework for that market? What additional factors need to be considered and added to the COSO framework? Can any components of a typical framework be discarded? Write a 2- to 3-page memo to senior management outlining and validating the factors that need to be considered.

Explanation / Answer

It is very much true that risk exposes us to potential losses but at the same time it brings opportunities also.

Due to the complexity involved of financial markets in emerging economies, the importance of operational risks has increased. The mounting difficulties of many emerging markets – namely Brazil, China, Russia, South – Africa, and Turkey are contributing significantly to a deteriorating 2016 global growth and mounting risks in financial markets.

The COSC Framework established in mid 1980.

The objectives are shown in the ERM cube at the top viz,

Strategic - high-level goals, aligned with and supporting its mission

Operational - effective and efficient use of its resources,

Reporting - reliability of reporting

Compliance - compliance with applicable laws and regulations.

It comprises eight component shown at the front like objective setting, event identification, risk assessment, risk response, control activities, information & communication, monitoring.

The application of all 8 components will not be identical in every unit. As small and mid size firms (less formal & less structured) as compare to large units.

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