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Embedding ERM Within COSO

By Tom Thompson, FEI  When the Committee of Sponsoring Organizations of the Treadway Commission (COSO) began a project to update their Enterprise Risk Management – Integrated Framework in October 2014, the intent was “to enhance the Framework’s content and relevance in an increasingly complex business environment so that organizations worldwide can attain better value from the enterprise risk management programs.”   The project consisted of the following four phases: Assess & Envision – Identified current challenges for organizations in implementing enterprise risk management (ERM). Build & Design – Developed the updated publication, including principles. Preparation for Public Exposure – Refined the updated publication through public review. Finalization – Issued updated Framework for public exposure for 90-day comment period.   Dennis Chesley, PwC's Global Risk Consulting leader and lead partner for the COSO ERM effort noted, “Enterprise risk management has evolved significantly since 2004 and stands at the verge of providing significant value as organizations pursue value in a complex and uncertain environment. This update more clearly connects enterprise risk management with a multitude of stakeholder expectations, establishes the relationship between risk and strategy, positions risk in the context of an organization’s performance, and helps organizations anticipate so they can get ahead of risk and embrace a mindset of resilience.”   The original Framework was used by management and boards to enhance their organization’s ability to manage uncertainty, consider how much risk to accept, and improve understanding of opportunities as it strives to increase and preserve stakeholder value. The revised Framework updates the core definitions of risk and enterprise risk management as well as the components of enterprise risk management. One of the most significant enhancements is the introduction of principles that reflect the evolution of risk management thinking and practices. The COSO Board believes the redefined components and principles will provide organizations with direction for all levels of management in designing, implementing, and conducting enterprise risk management practices.   The updated framework proposes the following 23 principles: Exercises Board Risk Oversight—the board of directors provides...

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