Recognizing that Enterprise Risk Management (ERM) is a constantly evolving process, COSO (The Committee of Sponsoring Organizations of the Treadway Commission) issued a new document in June 2017, Enterprise Risk Management – Integrating with Strategy and Performance which places a greater emphasis on strategy alignment and integrating ERM with decision-making. This new document builds on its predecessor, Enterprise Risk Management – Integrated Framework which was issued in 2004.
In January 2018, COSO and the World Business Council for Sustainable Development (WBCSD) issued a draft guidance for applying ERM to environmental, social, and governance (ESG) risks. The draft is designed to help organizations from start-ups to multinationals respond to the growing impact of ESG-related risks, ranging from extreme weather events to product safety recalls.
COSO’s update connects ERM with a number of stakeholder expectations and puts risk in the context of the overall performance of an organization. The update emphasizes how ERM informs strategy and its performance. Ultimately, COSO offers insights that are important to the business as a whole and not just for those responsible for risk management.
Highlights of the update include:
The update also seeks to clear up a number of misconceptions about ERM. Among them:
COSO/WBCSD Draft Guidance
There is an ever-evolving landscape of environmental, social, and governance (ESG)-related risks that may influence a company’s profitability, success, and survival. The World Economic Forum’s Global Risks Report 2018 identified tops risks, among them extreme weather events; water crises; natural disasters; and failure of climate change mitigation and adaptation.
COSO and WBCSD believe that leveraging a company’s ERM governance and processes can help identify, assess, and mitigate these risks. The draft guidance is designed to facilitate this process. Currently, the guidance is only in draft form and a lengthy consultation process is expected to take place in 2018 before any final recommendations from COSO and WBCSD are released.
If you have questions about the COSO updates and how they may apply to your organization, contact Alexander Moshinsky, Director, Operational Advisory and Risk Management at 212.331.7448 | AMoshinsky@BERDONLLP.com
Berdon LLP, New York Accountants