With the Yankees-Jays game on in the background, I just took a look at the COSO document on the role of the board of directors. Here are the highlights so you don’t have to read it:
As a result of the economic crisis, and the perception that organizations were not prepared, there is more focus on boards. So management teams and boards are embracing ERM to improve risk oversight, thus helping them make better, more risk-informed, strategic decisions, while protecting shareholder value.
The white paper also reminds the reader of the COSO ERM Framework and the four areas that contribute to board oversight:
- Understand the entity’s risk philosophy and concur with the entity’s risk appetite.
- Know the extent to which management has established effective enterprise risk management of the organization.
- Review the entity’s portfolio of risk and consider it against the entity’s risk appetite.
- Be apprised of the most significant risks and whether management is responding appropriately.
Finally, ERM can help provide a path of greater awareness of the risks the organization faces and their inter-related nature, more proactive management of those risks, and more transparent decision making around risk/reward trade-offs, which can contribute toward greater likelihood of the achievement of objectives.