Financial Scandals Of Enron, Worldcom, And Tyco Occurred Risk Management

1671 Words Jun 8th, 2016 7 Pages
Risk Management After the major financial scandals of Enron, WorldCom, and Tyco occurred risk management became a high priority for companies. According to Brown, Steen, and Foreman (2009) risk management can be defined as the culture, processes, and structures that are directed towards taking advantage of potential opportunities while managing potential adverse effects” (p.547). To assist companies in the risk management process, companies are incorporating a risk management system, this helps to improve the management and mistreatment of opportunities, helps to improve the development and achievement of companies, improves information handling and communication, assists to enhance a company’s liability, guarantee, and governance, and …show more content…
Effective risk management correlates with corporate governance which together helps provide protection against unethical and illegal behavior from employees (p. 116). Shad and Lai (2015), discuss how risk management is more important in today’s society than ever before. Additionally, the authors discuss companies implementing an Enterprise Risk Management (ERM) system in order to assist with the understanding and managing of risks (p. 1).
Purpose of Research and Research Questions The general purpose of this research is to review what risk management is and how it can improve a company’s overall performance. Additionally, this research looks to see how the different categories involved with risk management can assist companies in avoiding risk. This research is necessary to understand how risk management can help protect companies from fraud. The primary research questions are:
1. How does an ERM system help protect companies from risk?
2. How does internal auditing assist in the risk management process?
3. How is risk management beneficial to companies?

Literature Review According to Campbell (2009), risk management is geared to assist companies in achieving their goals and company objectives. A company’s risk management policy can be viewed as a type of corporate governance (p. 116). Risk management policies and procedures assist company management by providing information that allows them to designate resources that help balance the rewards and

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