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COSO releases results of two surveys on the current state of enterprise risk management and risk oversight

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) – an organization providing thought leadership and guidance on internal controls, enterprise risk management, and fraud deterrence – has released the results of two different surveys relating to the current state of enterprise risk management and risk oversight by boards. These surveys were commissioned by COSO and conducted in partnership with two outside organizations.

The first survey sought input directly from over 200 corporate directors to obtain deeper knowledge of the current state and desired future state of the risk oversight process as it is applied by boards of directors. Board members were divided on the effectiveness and maturity of their processes and efforts, according to the survey. While 53 percent of participants rated the risk oversight process in their organizations as “effective” or “highly effective,” more than 70 percent indicated that their boards are not formally executing mature and robust risk oversight processes.

The second survey, conducted by COSO with the assistance of the ERM Initiative at North Carolina State University, obtained information from corporate management about the current state of their risk oversight processes and feedback about COSO’s 2004 Enterprise Risk Management - Integrated Framework. The survey was intended to obtain management perspectives about the relative maturity of their risk management practices and to identify perceived strengths and/or weaknesses in COSO’s ERM Framework, as well as the extent of reliance on alternative frameworks to strengthen organizational enterprise risk processes and oversight.

This second survey suggests that boards may be over confident in management’s underlying risk management processes. Almost 60 percent of the 460 respondents admitted that their risk management processes are ad hoc and informal, almost half (42.4 percent) described their organization’s level of functioning of ERM processes as “very immature” or “somewhat mature” and about one-third (35 percent) admit that they are “not at all” or are “minimally” satisfied with the nature and extent of reporting to senior executives of key risk indicators.

The two studies suggest that there is room for improvement in enterprise risk management across many organizations.

Summary papers for the two surveys:

- Board Risk Oversight – A Progress Report: Where Boards of Directors Currently Stand in Executing their Risk Oversight Responsibilities

- COSO’s 2010 Report on ERM: Current State of Enterprise Risk Oversight and Market Perceptions of COSO’s ERM Framework.

•Date: 15th Dec 2010 • Region: World •Type: Article •Topic: Operational risk

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