Research On The Reconstruction Of Internal Control Basing On The Risk Management

The risk of enterprise is everywhere. Any enterprise's commercial activities would takerisks. In the competitive market, there is no reward without risk. The higher the rate of returnsbeing required, the greater the risk should take. Risk brings opportunities of profits, and alsowith possibilities of failure. In order to achieve the expected returns, we must properlymanage risk. Thus, for any enterprise, risk management is the core of its operating process.The term "risk management" firstly emerged in the 1950s of the 20th Century in the UnitedStates. In 1973, the Geneva Association brought the risk management thinking into Europeafter its set up, and then in 1980s, risk management was rapidly accessed to the Asia andAfrica and finally became the global pandemic.In 1992, the sponsored institutions of American Treadway Commission set up theCommittee of Sponsoring Organization of the Treadway Commission (COSO) as the specificcommittee devoted to the study of internal controls and issued the "Overall Framework ofInternal Control". Other western countries' relevant provisions are based on the US COSOreport. Since 1990s of the 20th century, the occurrence of a series of corporate scandals inEuropean and American countries contributed to the integration of risk management andinternal control, closely. COSO also formally introduced in 2004 a new COSO report ——"Enterprise Risk Management——the Overall Framework" for guiding enterprise riskmanagement activities. The rise of risk management had a major impact to internal control.In domestic, as one of the newly emerging things, the risk management has already beenpursued in the some enterprises. Since there are no concrete laws and regulations, this aspectresearch on risk management is still based on the reading of American COSO's relatedprovisions. In fact, each country, each profession or each enterprise has its own understandingto the risk management as the differences in their cultural and the social development. If wecannot felt out the concept of risk management and the principle of its mechanism, therewould be some deviations unavoidably in our practical work. Moreover to the domesticenterprises, in the aspect of consummation risk management and development internal control,they should explore to establish the management and control mechanism with Chinesecharacteristics by enlightening the experiences from different countries. That draws out thequestion being studied in this paper: How to regard the fusion of risk management and theinternal control fusion clearly? How will the overseas experience unify with china's practice?How to practically construct the internal control system based on the risk management?This paper is composed of four parts. The first part introduces the development of riskmanagement and internal control, pointing out the necessities of the studies on othercountries' correlated practices besides American. The second part discussed the debatesbetween risk management and the internal control in UK so as to generalize the developmentrule. The third part analyzes the development situation of risk management and internalcontrol in China. The last part unified the universal law of development of risk managementand internal control, the UK's successful experiences and our China's actual situation, andproposed some suggestions on the construction of internal control system based on the riskmanagement.