The early detection and the management of risk

Article 378 of Turkish Commercial Code numbered 6102 requires the establishment of an expert committee to deal with "the early detection and the management of risk" within the bodies of companies of which common stock is traded, as well as other companies in the case that auditors regard it as necessary. The main purposes of the early detection and the management of risk committee are to warn the board of directors and the general board against risks threatening the existence and the development of the enterprise, as well as to keep them constantly alert against risks. To determine the risks that may emerge on the way to achieve the company objectives as well as their possibility and their magnitude is within the area of responsibility of the board of directors, which is also responsible for establishing and maintaining the committee. The difference of this committee from an auditing committee is that an auditing committee keeps the board under supervision while this committee focuses only on risks. Besides, auditing is a retroactive action, whereas risk detection is related to the future and the interpretation of the future. Also, an audit is not to be managed while risk can and should be managed. The first chapter of this study involves the definition of risk as well as the categorization of risk types. The second chapter mostly deals with the importance of risk management, the principles of risk management and the process of risk management. In the third chapter, the risk types that enterprises are exposed to, the techniques to be employed for protection against risks, derivatives markets, financial crises, the early detection and the management of risk are discussed and answers to certain questions regarding the risk committee prescribed by Turkish Commercial Code numbered 6102 have been sought. Key Words: Risk, Risk types, Risk Management, Risk Management Process, Protection Against Risks, Financial Crisis, Turkish Commercial Code.