EMCC European Monitoring Centre on Change

Early risk management systems

Phase: Anticipation
  • Provision of labour market information
  • Support of companies' growth
Last modified: 03 August, 2021
Име (на собств. език):


Име на английски:

Early risk management systems


This instrument is available to corporations.

Main characteristics

Paragraph 91/2 of the Stock Corporation Law (IDW PS 340) requires public limited companies to establish a system of measures and control instruments that are able to identify developments, at an early stage, that might negatively affect the continued existence of the company. A similar stipulation can be found in paragraph 264 HGB (Commercial Code) which is generally applicable to corporations. This is done by implementing a risk management system.

In this context, risk management systems are regulatory instruments for public limited companies. An important pillar of such systems is the identification of risks systematically and early on. Companies need to establish a risk management process and control for vital business figures. Though every company can develop its own system, these systems should ideally include the following aspects:

  • internal risks - affecting business operation (such as organisational or financial risks); and
  • external risks - resulting from changes in the business environment (such as technological change or force majeure).

Early knowledge of potential internal and external risks will help companies to develope suitable solutions in response. Naturally, risk profiles can vary by region and sector. As companies work in a constantly changing environment, risk identification and controlling also need to be conducted on a continuous basis. 


  • Employer

Involved actors

National government
Legal framework.
Employer or employee organisations
Works council.
Funded by companies.


Limited information available, see below (weaknesses section). 


No information available.


According to a working paper about the statutory implementation of risk management system, the system is not efficient enough to detect early risks as it does not examine, record, evaluate and analyse individual risks continuously (Bunting, 2011). Moreover, there is criticism for the fact that although liquidity risks can jeopardise a corporation, liquidity management is not included in the group of risk elements. Furthermore, a written specification of the risk early warning and monitoring system is missing. Such specifications were first implemented in 2017, with the IDW PS 981, which includes principles for a voluntary audit of the risk management system.

In 2018, the DIIR Revisionsstandard Nr. 2 (DIIR Revisionstandard No.2) was extended in support of the IDW PS 340, specifying norms for the realisation of audit plans for risk systems. 


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