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COMPONENT TWO: RISK ASSESSMENT <br />Principle 6: Management defines objectives clearly to enable <br />the identification of risks and risk tolerances. <br />Through the creation of standard operating procedures and <br />accurate organizational reporting charts management conveys and <br />identifies objectives, missions, policies and risk tolerances to <br />employees. The Clerk -Treasurer and Town Council will lead a risk <br />analysis of three (3) major areas: <br />1. The effectiveness and efficiency of operations. <br />2. The reliability of reporting for internal and external <br />use. <br />3. Compliance with applicable laws and regulations. <br />For each category, the Clerk -Treasurer and Town Council will <br />define objectives in specific measurable terms in order to enable <br />the design of internal control for related risk, increase <br />understanding at all levels, assess performance, identify what is <br />to be achieved, who is to achieve it, how it will be achieved, <br />when it will be achieved and incorporate external requirements. <br />Principle 7: Management identifies, analyzes and responds to <br />risks related to achieving the defined objectives. <br />The Clerk -Treasurer and Town Council will identify, analyze and <br />respond to the risks identified in Principle 6 by determining: <br />1. <br />How likely <br />is the <br />risk to occur? <br />2. <br />How will it <br />impact <br />the objective? <br />3. <br />Is the risk <br />based <br />on complex or unusual transactions? <br />4. <br />Is the risk <br />based <br />on fraud? <br />Once each risk has been identified and analyzed, the Clerk - <br />Treasurer and Town Council will work with Department Heads to <br />determine how to respond to each risk with a specific solution <br />and action. <br />Principle 8: Management considers the potential for fraud when <br />identifying, analyzing and responding to risks. <br />Management is committed to fraud prevention by utilizing a "trust bv- <br />but verify" approach. The potential for fraud, misappropriation <br />and outright theft are contemplated as controls are designed for <br />various Town divisions. Fraud responses will include statutorily <br />required responses to fraud, including, but not limited to IC 5- <br />