A cross sectoral comparison of risk management practices in selected South African organizations

Tankiso Moloi

doi:10.21511/ppm.14(3-1).2016.10

Abstract

This paper examines the manner in which risk is governed in certain selected sectors of the South African economy. To extract the statement deemed as a proxy of risk management practices in the certain selected South African organizations, the disclosure risk measurement instrument was developed. This instrument was used as a gauging tool for the information disclosed in the integrated/annual report. Risk practices statements were formulated using the governance of risk chapter of the King III Report on Corporate Governance, applicable to all organization regardless of manner or form of incorporation and the Public Sector Risk Management Standards, applicable to South Africa’s public service organizations. The results obtained indicated a high level of risk management practices by the JSE listed companies. This could be attributed to the fact that the King Code has been incorporated as part of the JSE listings requirements. This paper further theorized that the high level practices in JSE listed companies could be attributable to the high level of scrutiny by shareholders in companies where they have vested interest. With regards to the National Government Departments and the South Africa’s higher education institutions, a lot of work still has to be done to embed key risk practices in these respective organization’s internal processes. Keywords: Higher Education Institutions (HEIs), Enterprise Risk Management (ERM), Johannesburg Securities Exchange (JSE), National Government Departments (NGDs), Risk Disclosure Index (RDI). JEL Classification: M4

Highlights

Several generic risk management principles have been developed to help organizations with the structured process to identify, manage, control and report their risks
The results obtained indicated a high level of risk management practices by the Johannesburg Securities Exchange (JSE) listed companies
The word generic in the first paragraph and sentence mean that the proposed risk management frameworks, principles and standards could be applied in any organization, regardless of that organizations nature of incorporation, i.e., they can be applied in private sector organizations, public sector organizations and nongovernmental organizations

Summary

Introduction

Several generic risk management principles have been developed to help organizations with the structured process to identify, manage, control and report their risks. In its opening paragraph on the risk management guidelines, the Australian and New-Zealand standards (2004) underscore the point advanced by Fone and Young (2005) on risk management frameworks, principles and standards This is clear in their (Australian & New-Zealand Standards, 2004) message where they emphasize that risk management is a key business process within both the private and public sector around the world. Fone and Young (2005) support the idea that risk management frameworks, principles and standards are generic and they can be applied in private sector organizations, public sector organizations and nongovernmental organizations. South African publicly funded higher education institutions, top 20 JSE listed companies and national government departments were selected for this purpose. The method followed in extracting the relevant data is discussed and, a section presenting the research results and an analysis and interpretation of the findings is presented

Brief overview of the latest developments on risk management

Methodology – the disclosure measurement instrument

Research findings and interpretation

E Incorporation of statements relating to risk approach

Findings

Conclusion