COSO Enterprise Risk Management: Understanding the New Integrated ERM Framework

Chapter 3. Components of COSO ERM

Chapter 1 discussed some of the developments that have led to concerns about the need for a definition of internal control and then to the Committee of Sponsoring Organizations’ enterprise risk management (COSO ERM) framework, and Chapter 2 introduced some classic risk management and measurement techniques that have been used by risk management professionals in many areas of operations, such as credit management, information technology (IT) systems development projects, and business continuity planning. This chapter will take these introductory developments and discuss the components or elements of the COSO ERM framework. As a three-dimensional model, COSO ERM looks very similar to the COSO internal controls framework discussed in Chapter 1 and consists of a series of key components as objectives and entity-based perspectives. Although all three dimensions are necessary to understand COSO ERM and how they should interact, this chapter will introduce two of the COSO ERM dimensions, while the third objective and entity components dimension of the framework will be discussed in Chapter 4. This COSO ERM framework will help all levels of managers to better understand and assess risks from a total enterprise perspective rather than just by individual risk areas and concerns.

ERM Definitions and Objectives: A Portfolio View of Risk

Every organization, whether for-profit commercial, not-for-profit, or a governmental agency, exists to provide value for its ...