Assets Management and Risk Control

Assets Management and Risk Control

María de Lourdes Eguren Martí
DOI: 10.4018/978-1-5225-5481-3.ch025
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Risk management and internal control is a subject that has increased its relevance due to the recent financial scandals on companies like Enron and Worldcom, and the increment of fraud cases and financial misstatements around the globe. In line with this, several initiatives have been defined or required in order to control the risk exposure in the company processes, including the development of internal control standards like Sarbanes-Oxley (SOX). One of the factors to be considered when taking optimum decisions is risk. Due to this, in this chapter the key concepts over risk assets management will be exposed, including a practical example under SOX framework as well as a system's approach and value management perspective.
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Globalization, uncertainty and the high volume of information which is currently available in the financial world, are factors which affect any decision making process under the current environment; considering enterprises are open systems, the turbulence of the environment generates an impact from risk management perspective (Febles & Oreja, 2008). In this sense, to have into consideration all the variables and elements which can have incidence into the matter of study, is a key aspect for a proper decision making, as there are factors like reputation risk, information availability, process design among others which increase the intrinsic complexity given by the environment (Leisinger, y otros, 2010). In addition to this knowledge, is important to understand this needs to come together with having in place the proper procedures and methodology, otherwise, this will open the door for not taking into account, all the aspects that must have being considered as well as lack of consistency over the applied criteria’s; in this sense the need of an integrated approach considering existing variables, open the door to defining new methodologies for an improved management, with a more efficient focus and adapted to reality (Porter & M, 2011)

As stated above, current turbulence of the environment and the occurrence of several financial scandals (like Enron explained in detail in a further section), have increased the firm´s interest on risk management procedures and requirements. As a consequence, academic researches on this topic are growing as well, however these researches are still under an early step of evolution, which give opens the door for new and original developments in this area (Pfister, 2009)

More specifically when considering decision making on asset management, one of the key aspects to have into consideration for being able to take optimum decisions, is an adequate management of the risk considering all the types of risks that can be applicable over asset management under a holistic approach (Ittner & Oyon, 2014)

In order to assure risk assessment is done effectively, the methodology and clear understanding of the nature of each of them complement the knowledge over the assets management process. With this being said, we can consider that the following aspects need to be considered from risk perspective, in order to contribute with an optimum decision making by understanding entity objectives, business processes, organizational resources, structure roles and responsibilities (Arens, Elder, & Beasley, 2014):

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