Enterprise Risk Management Essay

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Enterprise Risk Management Framework Presentation by Olayimikah Soetan 27 March 2008 Agenda 1. Introduction to Enterprise Risk Management (ERM) 2. The Organization 3. The COSO ERM Framework 4. The 8 Components 5. Summary 6. Conclusion 2 2 Introduction to Enterprise Risk Management (ERM) 3 3 1.1 In the Past… Market Risk Reputational Risk Credit Risk Legal Risk Settlement Risk Operational Risk Liquidity Risk All these risks were treated in “silos” 4 1.2 In Recent Years… Interactions Credit Risk Market Risk Reputational Risk Settlement Liquidity Risk Risk Operational Risk Legal Risk Portfolio View Holistic approach to Risk Management 5 1.3 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.” Source: COSO Enterprise Risk Management – Integrated Framework. 2004. 6 1.4 About COSO COSO is an acronym for the Committee Of Sponsoring Organizations of the Treadway Commission A voluntary private sector organization dedicated to improving the quality of financial reporting through business ethics, efficient internal control, and corporate governance The National Commission was jointly sponsored by five major professional associations in the United States i.e. 7 1.5 COSO Benefits of ERM Aligning risk appetite and strategy • Considering risk appetite when setting objectives, evaluation strategic alternatives or developing controls Enhancing risk response decisions • Identifying and selecting risk responses: avoidance, etc Reducing operational surprises and losses

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