Risk Managment

**57**

**Chapter 5**

**Abstract**

Risk Assessment Methodology in

This chapter classifies the risk and fundamental elements necessary to manage it. It presents the individual stages of the procedure and standards of conduct in risk management. In accordance with the EU accession agreement, Poland has developed and implemented a system of financial management and control standards in public finance sector units. This chapter presents the risk assessment tools that can be customized to the needs of a specific organization, including public sector entities. Information about how to manage risk in each EU country are made available because of the desire to show the stability and proper monitoring of the risks in order to fulfil the given tasks. This affects the perception of stability in the country,

**Keywords:** risk management, score-based risk assessment, management control,

Risk management concerns both public and private organizations. Recent failures in companies from the public and private sector all around the world resulted in an increased interest in effective risk identification and, most importantly, risk management. In many companies there are regular processes related to risk management, including periodic (e.g. monthly) reports for regulatory bodies. However, it turns out that such periodic reports are not sufficient for management bodies to prevent risk effectively. This is of particular importance in the public finance sector, where there is a high degree of legislation and hierarchy. Now, given the changeability of the economic situation caused by globalization processes, among other reasons, this method is no longer sufficient [1]. This method of management can be applied only in units which do not take numerous activities or when such activities do not generate unacceptable risk which may significantly deteriorate the situation. This is why risk should be considered in the tasks performed by units from the public finance sector. The possibilities of a public finance unit in terms of risk management in the course of its activities should be defined. Knowledge on how to use risk management tools will contribute to effectiveness in achieving goals, i.e. higher and more secure financial results [2]. Positive effects (opportunities) of risk management, which citizens and the administration can enjoy, are perceived by the Polish government as an added value. Thus, efforts should be made so that all employees in a public administration unit could fully understand the idea of risk management, which is not fighting risk or using it to achieve better results but managing it in line with the policy pursued by the management. It is, therefore, necessary for managers

Public Financial Institutions

*Leon Dorozik, Tomasz Strąk and Ireneusz Miciuła*

which has a direct impact on the economic effects.

public institutions, finance

**1. Introduction**

#### **Chapter 5**
