Risk-bearing capacity and risk aggregation

The new version of IDW PS 340 (IDW PS 340 n.F.) takes into account the innovations in the establishment and auditing of corporate governance systems that have resulted from the further development of corporate practice since the original standard was adopted in 2000. The new version of IDW PS 340 specifies the basic elements of the early risk detection system, such as risk-bearing capacity, risk assessment and aggregation, communication, documentation and reporting. An appropriate risk early warning system in the company is intended to ensure that risks threatening the existence of the company are identified, assessed, managed and monitored at an early stage. This is done, among other things, by defining measures by the Executive Board.

With regard to the revision of IDW PS 340, the following points should be highlighted in particular:

• The risk-bearing capacity (resilience) of the company is to be defined by the Executive Board in order to be able to assess the risks threatening the existence of the company against this background. The emphasis on risk-bearing capacity is intended to ensure that measures are focused on developments that actually pose a threat to the company as a going concern.

• In risk assessment, risks are to be evaluated both "gross" and "net" (after inclusion of the risk management measures introduced). To this end, fixed assessment criteria must be defined in advance for quantifiable, but also for non-quantifiable risks.

• The importance of risk aggregation is emphasized in order to identify risks that may not pose a threat to the Group's continued existence as a going concern as an individual risk, but could be classified as a going concern risk in combination or due to interactions with other risks.

Your challenges against the background of IDW PS 340 n.F.

Companies face a variety of challenges in implementing the requirements for risk-bearing capacity, risk assessment and risk aggregation in accordance with IDW PS 340:

• Breaking up historically grown structures

• Transfer of MS Excel related tools to professional software solutions

• Differentiation of gross and net risks

• Mathematical implementation of risk aggregation

Approaches to the challenges against the background of IDW PS 340 n.F.

• Supporting the RMS function in the introduction/implementation of the new requirements

• Systematic collection of additional information for initial implementation

• Updating and optimization of existing RMS processes
   

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