How Accountants Impact Risk Management

The Bowling Green State University (BGSU) online Master of Business Administration (MBA) with a Concentration in Accounting program develops many aptitudes for management accountants, including expertise in supporting a company’s business strategies and activities. Risk management is crucial, with proactive engagement being the optimal approach to address various challenges before they escalate into disasters. Reacting to risks when they have already occurred often proves ineffective.

In today’s business landscape, characterized by a growing array of risks like cyberattacks and global pandemics, companies must embrace a preemptive mindset in evaluating and controlling risks across all dimensions. In this pursuit, management accountants should play a pivotal role.

The BGSU Curriculum Provides Risk Management Training

BGSU’s Auditing course gives graduates an understanding of the audit process and tools for internal controls, the use of auditing principles and procedures for independent verification of financial records and more effective methods for decision-making. Each of these skills will help you in your management accounting role to mitigate significant risks, making you more valuable to the organizations you work for or support. These skills are taught throughout the curriculum of this AACSB-accredited program and are a focal point in courses on managerial accounting, marketing management, financial management, investment analysis, quantitative analysis, supply chain management, strategic project management and business ethics.

The Role of Enterprise Risk Management in Revealing and Managing Risk

Management accountants play a vital role in understanding and applying enterprise risk management (ERM) principles to the daily operations of a business. ERM is a strategic framework that integrates risk management practices throughout an organization to identify, assess and manage risks that may impact its objectives, considering financial and operational aspects. These can include financial risks, equipment and machinery risks, environmental hazards and human factors.

Managerial accountants actively promote and facilitate effective risk and opportunity management to support value creation and preservation over time. While mitigating and controlling risks are essential, management accountants also focus on the benefits of intelligent risk-taking. However, this requires specific training. There is often a gap between the risk management knowledge and skills employers need and the training managerial accountants receive, resulting in a limited advancement of ERM processes and outcomes within many organizations.

To bridge this gap, finance and accounting professionals must enhance their understanding and application of ERM. This involves acquiring the necessary knowledge and skills to meet the demands of modern employers and effectively contribute to ERM practices within their organizations. By helping to close this gap, BGSU prepares management accountants to fulfill their role in ERM and contribute to the overall success of their businesses. The program trains professionals to ensure their organizations are safe and resilient through risk identification, assessment and analysis; mitigation strategies; performance monitoring and decision support.

Five Components of ERM

The COSO (Committee of Sponsoring Organizations) framework is widely adopted for ERM. Through these five main components, it provides guidance on establishing effective risk management processes within an organization:

  1. Governance and Culture: This component focuses on establishing the overall risk management structure, including defining responsibilities, creating a risk-aware culture and aligning risk management practices with its values and objectives.
  2. Strategy and Objective-Setting: This component includes considering risks and opportunities when formulating strategies and setting objectives. By integrating risk management into strategic planning, organizations can proactively address risks and improve their ability to achieve desired outcomes.
  3. Performance: This component includes identifying and assessing risks that may affect the organization’s ability to achieve its objectives. Effective risk management enables organizations to optimize performance while minimizing the negative impact of potential risks.
  4. Review and Revision: This component involves evaluating the effectiveness of risk responses and control activities and identifying areas for improvement. Regular review and revision ensure that risk management practices remain relevant and responsive to changing circumstances and emerging risks.
  5. Information Communication and Reporting: This component involves establishing effective communication channels to facilitate sharing of relevant risk information across different levels and functions. Timely and accurate reporting of risks helps stakeholders make informed decisions and take appropriate actions.

Learn About ERM in BGSU’s Online MBA – Accounting Program

The COSO framework provides a comprehensive approach to risk management, promoting a risk-conscious culture and enhancing any organization’s ability to achieve its objectives while navigating uncertainties. Effectively implementing ERM and this framework begins with hiring well-trained managerial accountants prepared for their risk management roles. Professionals with this training — part of a rigorous business and accounting program — are in high demand, as evidenced by the success of BGSU program graduates at many top-performing organizations, including Fortune 500 companies.

Learn more about BGSU’s online MBA – Accounting program.

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