Environmental Risk Management in Government: Introduction to the application units of Ministry of Finance - DEVINITION RISK MANAGEMENT
DEVINITION RISK MANAGEMENT
The term (risk) have different definitions of risk. The risks associated with possible incidents or circumstances that may threaten the achievement of the goals and targets of the organization. [3] Vaughan (1978) raised the risk of some definitions as follows:
- Risk is the chance of loss (Risk is the chance of loss).
Chance of loss associated with an exhibition (openness) against possible loss. The statistics, chance is used to indicate the level of probability will be the emergence of certain situations. Some authors reject this definition because there are differences between the level of risk with the level of losses. In case the chance of loss of 100%, meaning the loss is so sure there is no risk.
- Risk is the possibility of loss (risk is the possibility of loss).
The term means the possibility that the probability of the event are zero and one. However, this definition is less suitable to be used in the quantitative analysis.
- Risk is uncertainty (Risk is the uncertainty).
Uncertainty can be subjective and objective. Subjective uncertainty is an individual assessment of the risk situation based on knowledge and attitudes of the individuals concerned. Objective uncertainty will be described in the following two definitions of risk.
- Risk is the dispersion of the actual from expected results (Risk is the actual distribution of the results from the expected results).
Experts statistics defines risk as the value of degrees of irregularities around a central position in or around the average.
- Risk is the probability of any outcome different from the one expected (Risk is the probability something different outcome with the expected outcome). According to the definition above, the risk is not probabilita from a single incident, but probabilita from several different outcome from the expected.
From the various definitions above, the risks associated with the possible result of bad (losses), which is not desired, or unexpectedly. In other words, it shows the possibility of uncertainty.
Risk can occur in the service, performance, and reputation of the institution concerned. The risk that there may be caused by various factors, among other natural events, operations, human, political, technological, personnel, financial, legal, and management of the organization.
A risk that there may be other risks come from, and can be caused by various factors. The risk of low performance of agencies comes from a low risk of quality service to the public. Risk last caused by factors of human resources that are owned and operational organizations such as keterbatan office facilities. The risk that there will be no impact on the achievement of the mission and goals of these institutions, and the emergence of mistrust from the public.
Risk is not believed to be avoided. With regard to the public sector, which demands transparency and enhanced performance with the limited funds available, the risks faced by the government institutions will be growing and growing. Therefore, the understanding of the risks can be keniscayaan to determine the priority strategies and programs in the achievement of organizational goals.
Risk can be reduced and even removed through risk management. The role of risk management can be expected to anticipate the fast changing environment, develop corporate governance, to optimize the preparation of strategic management, to secure resources and assets owned organization, and reduce reactive decision making from top management.
According to COSO, risk management (risk management) can be interpreted as' a process, effected by an entity's Board of Directors, management and the other at present, Applied in strategy setting and across the enterprise, Designed to identify potential events that may affect the entity , Manage the risk to be within its risk appetite, and provide reasonable assurance regarding the Achievement of entity objectives. '[4] definition of risk management described above can be further based on the keywords as follows:
- On going process
Risk management is continuously implemented and monitored regularly. Risk management is not an activity that is done occasionally (one-time event).
- Effected by people
Risk management is determined by the parties that are in the environmental organization. Government institutions for the environment, risk management articulated by leaders and officials institution / department concerned.
- Applied in setting strategy
Risk management has been developed since the formulation of the strategy of the organization by the top management of the organization. With the use of risk management, strategy prepared with the adjusted risk faced by each section / unit of the organization.
- Applied across the enterprise
Strategies that have been selected based on the risk management applied in the operational activities, and covers all parts / units in the organization. Given the risk of each part is different, then the implementation of risk management based on the determination of risk by each section.
- Designed to identify potential events
Risk management is designed to identify events or situations that potentially disturb the attainment of organizational goals.
- Provide reasonable assurance
The risk is managed properly and will provide reasonable assurance that the activities and services by the organization can run optimally.
- Geared to achieve objectives
Risk management is expected to become guidelines for the organization in achieving its goals.
REFERENCES
Chapman, Christy. Bringing ERM into Focus. Internal Auditor, June 2003
Committee of Sponsoring Organizations (COSO) of the Treadway Commission. What is COSO: Background and Events Leading to the Internal Control-Integrated Framework. 1992
Darmawi, Herman. Risk Management. Earth script, 2005.
Simmons, Mark. COSO Based Auditing. The Internal Auditor, December 1997
The Institute of Internal auditors. Internal C
Vaughan, Emmet. Fundamentals of Risk and Insurance. 2nd, John Willey, 1978
- Risk is the chance of loss (Risk is the chance of loss).
Chance of loss associated with an exhibition (openness) against possible loss. The statistics, chance is used to indicate the level of probability will be the emergence of certain situations. Some authors reject this definition because there are differences between the level of risk with the level of losses. In case the chance of loss of 100%, meaning the loss is so sure there is no risk.
- Risk is the possibility of loss (risk is the possibility of loss).
The term means the possibility that the probability of the event are zero and one. However, this definition is less suitable to be used in the quantitative analysis.
- Risk is uncertainty (Risk is the uncertainty).
Uncertainty can be subjective and objective. Subjective uncertainty is an individual assessment of the risk situation based on knowledge and attitudes of the individuals concerned. Objective uncertainty will be described in the following two definitions of risk.
- Risk is the dispersion of the actual from expected results (Risk is the actual distribution of the results from the expected results).
Experts statistics defines risk as the value of degrees of irregularities around a central position in or around the average.
- Risk is the probability of any outcome different from the one expected (Risk is the probability something different outcome with the expected outcome). According to the definition above, the risk is not probabilita from a single incident, but probabilita from several different outcome from the expected.
From the various definitions above, the risks associated with the possible result of bad (losses), which is not desired, or unexpectedly. In other words, it shows the possibility of uncertainty.
Risk can occur in the service, performance, and reputation of the institution concerned. The risk that there may be caused by various factors, among other natural events, operations, human, political, technological, personnel, financial, legal, and management of the organization.
A risk that there may be other risks come from, and can be caused by various factors. The risk of low performance of agencies comes from a low risk of quality service to the public. Risk last caused by factors of human resources that are owned and operational organizations such as keterbatan office facilities. The risk that there will be no impact on the achievement of the mission and goals of these institutions, and the emergence of mistrust from the public.
Risk is not believed to be avoided. With regard to the public sector, which demands transparency and enhanced performance with the limited funds available, the risks faced by the government institutions will be growing and growing. Therefore, the understanding of the risks can be keniscayaan to determine the priority strategies and programs in the achievement of organizational goals.
Risk can be reduced and even removed through risk management. The role of risk management can be expected to anticipate the fast changing environment, develop corporate governance, to optimize the preparation of strategic management, to secure resources and assets owned organization, and reduce reactive decision making from top management.
According to COSO, risk management (risk management) can be interpreted as' a process, effected by an entity's Board of Directors, management and the other at present, Applied in strategy setting and across the enterprise, Designed to identify potential events that may affect the entity , Manage the risk to be within its risk appetite, and provide reasonable assurance regarding the Achievement of entity objectives. '[4] definition of risk management described above can be further based on the keywords as follows:
- On going process
Risk management is continuously implemented and monitored regularly. Risk management is not an activity that is done occasionally (one-time event).
- Effected by people
Risk management is determined by the parties that are in the environmental organization. Government institutions for the environment, risk management articulated by leaders and officials institution / department concerned.
- Applied in setting strategy
Risk management has been developed since the formulation of the strategy of the organization by the top management of the organization. With the use of risk management, strategy prepared with the adjusted risk faced by each section / unit of the organization.
- Applied across the enterprise
Strategies that have been selected based on the risk management applied in the operational activities, and covers all parts / units in the organization. Given the risk of each part is different, then the implementation of risk management based on the determination of risk by each section.
- Designed to identify potential events
Risk management is designed to identify events or situations that potentially disturb the attainment of organizational goals.
- Provide reasonable assurance
The risk is managed properly and will provide reasonable assurance that the activities and services by the organization can run optimally.
- Geared to achieve objectives
Risk management is expected to become guidelines for the organization in achieving its goals.
REFERENCES
Chapman, Christy. Bringing ERM into Focus. Internal Auditor, June 2003
Committee of Sponsoring Organizations (COSO) of the Treadway Commission. What is COSO: Background and Events Leading to the Internal Control-Integrated Framework. 1992
Darmawi, Herman. Risk Management. Earth script, 2005.
Simmons, Mark. COSO Based Auditing. The Internal Auditor, December 1997
The Institute of Internal auditors. Internal C
Vaughan, Emmet. Fundamentals of Risk and Insurance. 2nd, John Willey, 1978
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