Matakuliah
Tahun
: Manajemen Kinerja Sistem Komputer
: Feb - 2010
03. Business Measurement Systems:
Information Reliability and Risk Assessment
Pertemuan 05-06
03. Business Measurement Systems:
Information Reliability and Risk
Assessment
Pertemuan 05 – 06
03. Business Measurement Systems: Information
Reliability and Risk Assessment
01. Decision Making and Risk
Business Decision Model and Risk
• The owners or managers of a business entity determine
its objective, strategies to achieve objectives, and
business processes to implement strategies.
• Business measurement systems are designed to
measure and display key success factors for achieving
objectives.
• The measurements facilitate planning and coordination
of day-to-day activities, as well as subsequent
evaluation of performance.
Business Risk
•
•
Business risk has been defined as " the threat that an event or action will
adversely affect an organization's ability to achieve its business objectives
and execute its strategies successfully".
External environment risks
– Threats from broad factors external to the business including substitute
products, catastrophic loss, changes in customers' tastes and preferences,
competitors, the political environment, laws/regulations, and capital and labor
availability.
•
Business process and asset loss risks
– Threat from ineffective or inefficient business process for acquiring, financing,
transforming, and marketing goods and services, and threats of loss of firm
assets including its reputation.
•
Information risks
– Threats from poor-quality information for decision making within the business
and erroneous information provided to outsiders.
Figure 3.1
Figure 3.1 presents more details of risk in each of the three broad categories.
02. Risk Identification and Mitigation
Risk identification, Sourcing, and Sizing.
• Managing risk is essential to achieving long-term and
short-term objectives of a business .
• One approach to risk management has been developed
by Arthur Andersen and summarized in Managing
Business Risks : An Integrated Approach.
Figure 3.2 is a diagram based on its risk assessment and control
steps.
Risk/Reward Trade-off and Risk Mitigation
• For each potentially important risk
identified, sourced, and sized, the risks
versus reward trade-off is evaluated
Monitoring Risk
• Whatever the route taken, the last step in risk mitigation
is continued monitoring for unexpected conditions and
changes in conditions.
• Figure 3.3 presents a chart showing application of the
risk identification, sourcing, sizing, assessment, and
response (RISSAR) approach as it might be applied by
Guinness PLC.
03. Information Reliability
Quantifying Information Misstatements
• The difference between recorded value and true
value will be called misstatement .
• That is, Misstatement = Record value - true
value, M = Yr - Y.
Three Examples of Information Risk
Mitigation
•
Inventory Errors
– Several years ago, due to poor record keeping for individual items of inventory,
LJ Appliances experienced frequent stockouts for some items, while other items
had many months' supply on hand.
– Figure 3.4
• A. Inventory Misstatement Distribution
• B. Un collectable Receivables Distribution.
• C. Aggregate Earnings Misstatement Distribution.
•
Credit Risks
– Several years ago, LJ Appliances was experiencing what it considered to be
excessive losses on recorded receivables due to salews to customers who did
not pay their bills.
•
Bid Price Discount
– Figure 3.4 part C, shows Tim's mental image of possible earnings misstatement
.
– If audited earnings are $.12, then Tim is willing to pay 8 X $.12 = $.96 .
Figure 3.5
Partial RISSAR Chart for LJ‘ s Appliances Information Risk.
04. Risk Mitigation and Reliability Enhancement Methods
Internal Control and Risk Mitigation
• Two principal means by which management
can mitigate the consequences of risk and
enhance information reliability are internal
control and assurance services.
Internal Control Component and Limits
In chapter 1, Internal Control was defined as : a process by
an entity's board of directors, management and other
personnel designed to provide reasonable assurance
regarding the achievement of objectives in the following
categories : effectiveness and efficiency of operations,
reliability of financial information, compliance with the
applicable laws and regulations.
Figure 3.6
Figure 3.6 diagrams the Three COSO categories as overlapping circles with seven identifiable subcategories.
Risk and Information Reliability Assurance
Service
• Assurance services as defined in chapter 1 include
services directed toward improving relevance and
reliability of information and its context for decision
makers.
• Risk-related services encompass improving information
about risks faced by a business -- their identification
sourcing, and sizing.
Figure 3.7
• Figure 3.7 is a sketch of how an independent
attestor audits a financial statement information
display, with the bold boxes indicating
management activities.
05. Accounting Information Decomposition
as a Risk Assessment Tool
Figure 3.8
Figured 3.8 diagrams the distribution of true value expectations.
06. Risk to Outside Directors and Auditors