COSO Emphasizes Board’s Role in Overseeing Risk

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) on Tuesday published a document to help boards of directors strengthen their oversight of enterprise risks.

The four-page paper, Effective Enterprise Risk Oversight: The Role of the Board of Directors, calls attention to COSO’s Enterprise Risk Management—Integrated Framework (2004) and its definition of ERM.

In emphasizing the critical role boards of directors play in overseeing ERM, it points to the following areas discussed in COSO’s 2004 ERM framework that contribute to board risk 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.

COSO is developing an additional thought paper that will provide more in-depth discussion on how senior management can strengthen risk management processes to improve the board’s risk oversight processes. That paper is expected to be released in the fall.  

Effective Enterprise Risk Oversight: The Role of the Board of Directors can be downloaded at coso.org. An executive summary of COSO’s Enterprise Risk Management—Integrated Framework is also available on COSO’s Web site.