Principle two of King I report states that the board of directors and managers should ensure that through a managed and effective process, board appointments are made that provide a mix of proficient directors, each of whom is able to add value and to bring independent judgement to bear on the decision-making process. Describe how this principle is important in risk management. Differentiate between micro and macro risk
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Principle two of King I report states that the board of directors and managers
should ensure that through a managed and effective process, board appointments
are made that provide a mix of proficient directors, each of whom is able to add
value and to bring independent judgement to bear on the decision-making
process.
Describe how this principle is important in risk management.
Differentiate between micro and macro risk.
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