The Committee of Sponsoring Organisations of the Treadway Commission (COSO), which provides guidance on internal control, ERM and fraud deterrence, has launched an updated Enterprise Risk Management Integrated Framework to reflect changes in the risk management landscape and is seeking public comment on the proposal.
The update, “Enterprise Risk Management — Aligning Risk with Strategy and Performance” is designed to address the needs of organisations to improve their approach to managing new and existing risks as a way to help create, preserve, sustain and realise value, said COSO in a statement.
COSO’s original ERM framework was launched in 2004 and is now widely-used by organisations worldwide. Recognising that significant new risks have emerged since then which demand heightened board awareness and oversight of risk management as well as improved risk reporting, COSO saw the need to update the framework to reflect the critical importance of the connection between strategy and performance, offer perspective on current and evolving concepts and applications of enterprise risk management, and update the core definitions of risk and enterprise risk management.
Potential to be used more extensively
One of the most significant enhancements is the introduction of components and supporting principles that reflect the evolution of risk management thinking and practices. “As we’ve seen the Framework applied in practice, we’ve recognised that it has the potential to be used more extensively,” said Mr Robert B Hirth Jr, COSO Chair. “We realised that certain aspects would benefit from more depth and clarity, as well as greater insight into the links between strategy, risk and performance.”
The new framework also updates the importance of ERM’s role in strategic planning and emphasises how critical it is to embed risk management practices across all departments and functions of an organisation. COSO had engaged PwC, author of the original 2004 Framework, to lead the update and also formed an Advisory Council comprising representatives of industry, academia, government, and non-profit organisations to provide input as the project progresses.
Public comment will be accepted via the COSO website through 30 September 2016.