Linking Risk Management to Strategic Controls a Case...

Linking risk management to strategic controls: a case study of Tesco plc Margaret Woods Nottingham University Business School, Wollaton Road, Nottingham, UK E mail: margaret.woods@nottingham.ac.uk Abstract: Definitions and perceptions of the role and styles of risk management, and performance management/strategic control systems have evolved over time, but it can be argued that risk management is primarily concerned with ensuring the achievement of strategic objectives. This paper shows the extent of overlap between a broad-based view of risk management, namely Enterprise Risk Management (ERM), and the balanced scorecard, which is a widely used strategic control system. A case study of one of the UK s largest retailers, Tesco plc, is†¦show more content†¦. . that incorporates the internal control framework within it† (COSO, 2004, foreword, p.v). The profile of risk management is thus raised substantially, as it shifts from being a component of internal control to one in which it effectively encompasses internal control. This change in thinking is of great potential significance for the risk and audit professions. The COSO 2004 report complements the Sarbanes Oxl ey Act (SOX) of 2002, which was a direct response to the corporate scandals of WorldCom and Enron. The act places great emphasis on the responsibilities of directors for effective internal control, although it contains no provisions on the role of internal audit function. Section 404 of SOX requires that a company’s annual report should contain an internal control report which includes a statement of management’s responsibility for establishing and maintaining an internal control system, and an assessment of the system’s effectiveness. This must be supplemented by a statement from the external auditor attesting to and reporting on the management’s assessment report. Like the UK, therefore, the US regulators seek to emphasise management’s responsibilities for the design and maintenance of internal control systems. In designing internal control and risk management systems managers need to try and strike a balance between taking advantage of the growt h and returns that can be generated by taking risks with the potential losses that may also result fromShow MoreRelatedTesco Supply Chain7829 Words   |  32 Pagesâ€Å"The Evolution of Supply Chain Management in Retail Sector of Tesco and Analytical Study for the Period of 2005-2011† Chapter One: Introduction 1.1 Introduction Supply chain as a whole can be seen as the flow of water in a river: organizations located closer to the original source of supply are described as being upstream , while those located closer to the end customer are downstream . The flow of the whole river is being concerned. 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