Enterprise Risk Management: Aligning Strategic Goals with Risk Tolerance

What is the ERM framework of COSO focused on?

a. Identification and management of internal threats
b. Identification and management of external threats
c. Identification and management of both internal and external threats

Answer:

c. Identification and management of both internal and external threats

The Enterprise Risk Management (ERM) framework of COSO is focused on the identification and management of both internal and external threats. This framework helps organizations align their strategic goals with their risk tolerance by recognizing potential risks, assessing their impacts, and creating strategies to manage them effectively.

Internal risks within an organization could include operational failures, process inefficiencies, or employee misconduct, while external risks may arise from factors such as market volatility, regulatory changes, or natural disasters. By addressing both internal and external threats, the ERM framework enables organizations to proactively manage risks and ensure that their goals are in alignment with their risk appetite.