| dc.description.abstract | This study was carried out to explore the emerging roles of internal audit function enterprises risk governance. This was an exploratory research carried out with an objective of finding out what roles does internal audit play in the management of risk within the changing risk environment. This study addresses itself to the background description, statement of the problem, the objectives, research questions and study significance.
The concept of risk management has been a widely debated topic from the early days of finance (Mshane etal, 2011). Risk management was considered irrelevant under perfect market conditions. However organizations operate in imperfect market conditions and risk management has become critical. The complexity in the external and internal environments of the organization have shifted the management of risk in a broad perspective leading the birth of terms like enterprise risk management.
Enterprise risk management (ERM) is one of the top of challenges senior executives face globally and National Water and Sewerage Corporation is not an exception. Both domestic and global markets continue to become complex creating challenges to organizations. Every organization is in some extent in the business of risk management irrespective of the products and services it delivers to the market (Lonescu, 2008).Despite risks ubiquity or perhaps because of it there is no universal definition of risk (Damodaran, 2008). Much like human beings companies operations are subject to risks.
Historically the term risk management was coined as far back as the early 1950s when insurance managers began to identify themselves as risk managers and began practicing what they called risk management activities (Covello and Mum Power, 1985). Covello and Mum, 1985 argue that risk management has existed for centuries, beginning as far back as the Code of Hammurabi although according to them it may have been termed differently. According to McShane et al (2011) traditionally risk management has been compartmentalized and uncoordinated within a firm. Risk had been managed in silos with corporate managers focusing on pure risks such as hazard risks, whereas treasury/finance department used derivatives to reduce financial risks such as credit market risk, foreign exchange risk and liquidity risks. ERM attempts to reduce all risks including additional risks such as strategic and operational risks and their coordinated efforts across the organization as risks may have a wider impact across the organization than just a specific function.
Globally events such as the test of nuclear by North Korea in a water body, Japanese earth quake, political unrest in the middle East, continuing concerns about cyber threats and WikiLeaks style of information disclosure high light the impact and speed in which emerging events can affect the strategic success of an enterprise. Countless of companies have defaulted in the recent fraud scandals and financial crises. The dot.com bubble and the accounting scandals in the 21st century related to companies such as Enron, World com etc brought down numerous companies. Further still the financial crisis of 2007/2008 brought the entire world on its knees.
The water sector Sub-Saharan is not an exception to these threats, the water resources have continuously dwindled, financing projects for water extension still a change and water scarcity has been a real problem. Available data for example on climate change projections for instance provide ample evidence that water resources are vulnerable and have the potential to be strongly impacted by climate change with extensive consequences to human societies and ecosystem (Ribeiro et al.,2009). The potential impact of water scarcity on operations of the organizations like National Water and Sewerage Corporation is very high.
Many organizations are responding to these challenges for greater risk management and oversight by implementing a holistic approach to risk management frequently referred to as enterprise risk management. Enterprise risk management has therefore become an intellectual area of research. Today’s internal audit function plays a key role in an overall governance structure by facilitating the identification, evaluation, communication and reporting of activities of enterprise risk governance activities. Due to the increased complexity and volume of activities, internal audit function is required to continuous supply the senior executive with the required information for effective governance of the organization. The roles of audit function are evolving to be able to match the increased complexity of business environment. The purpose of this report was therefore explore the emerging roles of internal audit function in coordinating the risk management roles. | en_US |
