Enterprise-Risk-Management.docx - Enterprise Risk Management \u2014 Integrated Framework Today\u2019s organizations are concerned about \u2022 Risk Management

Enterprise-Risk-Management.docx - Enterprise Risk...

This preview shows page 1 - 3 out of 5 pages.

Enterprise Risk Management — Integrated Framework Today’s organizations are concerned about: Risk Management Governance Control Assurance (and Consulting) ERM Defined: “… a process, effected by an entity's board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.” Why ERM Is Important Underlying principles: Every entity, whether for-profit or not, exists to realize value for its stakeholders. Value is created, preserved, or eroded by management decisions in all activities, from setting strategy to operating the enterprise day-to-day. ERM supports value creation by enabling management to: Deal effectively with potential future events that create uncertainty. Respond in a manner that reduces the likelihood of downside outcomes and increases the upside. Enterprise Risk Management Integrated Framework This COSO ERM framework defines essential components, suggests a common language, and provides clear direction and guidance for enterprise risk management. The ERM Framework Entity objectives can be viewed in the context of four categories: Strategic Operations Reporting Compliance ERM considers activities at all levels of the organization: Enterprise-level Division or subsidiary Business unit Processes Enterprise risk management requires an entity to take a portfolio view of risk. Management considers how individual risks interrelate. Management develops a portfolio view from two perspectives: - Business unit level - Entity level The eight components of the framework are interrelated … Internal Environment Establishes a philosophy regarding risk management. It recognizes that
Image of page 1
unexpected as well as expected events may occur. Establishes the entity’s risk culture. Considers all other aspects of how the organization’s actions may affect its risk culture. Objective Setting Is applied when management considers risks strategy in the setting of objectives. Forms the risk appetite of the entity — a high-level view of how much risk management and the board are willing to accept.
Image of page 2
Image of page 3

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture

  • Left Quote Icon

    Student Picture