Risk Management Report
Risk management, which is considered an essential part of the strategic management of the person authorized by the Kuwaiti Capital Markets Authority, which should assist him in identifying, analyzing, measuring and evaluating risks, managing them and the mechanisms for following them up and reporting them in a proper manner to ensure protection and add value to the institution.
Therefore, the authorized person must comply with what is stated in the text of Article No. (4-4) of Chapter Four (Risk Management) of Book Six (Internal Policies and Procedures of the Authorized Person) of the Executive Regulations of Law No. 7 of 2010, which stipulates the necessity to provide the Markets Authority Al-Mal with a copy of the semi-annual risk report in Arabic within a maximum period of sixty days from the end of the reporting period, provided that the aforementioned report is prepared at the end of the first half and the end of the financial year of the authorized person.
A Risk Management Review varies on the report’s intended purpose.
For example, a risk report that outlines risks to employee safety would likely be structured differently from a report meant to convey financial risks.
Here are a few common elements included in a risk report includes:
Executive summary: A synopsis for senior management to identify the biggest risks.
Risk profile: A description that uses numerical values to help quantify a risk. Although these risk profiles can be created in various ways, they are often based on a risk’s seriousness combined with the odds of the risk actually occurring.
Risk capacity: A metric reflecting how much risk an organization can afford to take. For example, a risk capacity might be a worst-case statement of how much money an
organization could lose without going out of business.
Tolerance levels: A measurement of how much risk an organization is willing to take on. Whereas risk capacity reflects how much an organization could lose before going bankrupt, risk tolerance measures how much an organization is willing to lose. A risk tolerance value is normally much lower than its risk capacity value and is sometimes categorized as conservative, moderate or aggressive.
Key risk indicators (KRI): Metrics that are tied to a risk that has been identified. If one of these metrics reaches a threshold value, it may indicate that the identified risk is beginning to happen. As such, KRIs act as an early warning system that can give management teams time to act before an identified risk can fully occur.
Environmental risks: Identifies risks that the organization’s activities pose to the environment due to factors such as pollution. This section is not always required, depending on the type of risk report.