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do you use coso framework to manage risk? what is the diffrence between coso framework and the risk map and also TARA framework?
Yes, COSOs framework is used to mange risk.
The Map, which I assume you are talking about the impact/consequence matrix?, is used to analyse risk
Tara is used as a process to respond to risk, i.e. to transfer, avoid, reduce or accept.
Both of these are covered in COSO’s framework (see below)
COSO’s enterprise risk management framework provides a coherent framework for organisations to deal with risk, based on the following elements…
Internal (Or Control)Environment – Tone of the organisation, Risk attitude/Appetite
Objective Setting – Objectives should support the overall mission of the entity, and be consistant with its risk appetite.
Event Identification – Prepare a list of potential risks (both internal and external)
Risk Assessment – Prioritise the potential risks – this is where the ‘Map’ you mentioned above comes in… i.e. High Probability/High Impact, Low probability, High impact etc..
Risk Response – Management selects risk responses such as TARA (transfer, accept, reduce, or avoid), which are used to develop a set of actions to align risks with the entity’s risk tolerances and risk appetite.
Control Activities – Policies and procedures in place to help ensure risk responses are effectively carried out.
Information and Communication – Relevant information identified, effective communication throughout the entity (incl Shareholders and regulators), enabling the workforce to carry out their responsisbilities, which will in effect minimise risk.
Monitoring – the control processes in place are monitored and if neccessary modified. Effective monitoring requires active participation by the board and senior management, and strong information systems, so that the data senior managers need is fed to them.
Hope this helps.
RazaYou’re welcome, you should also listen to the video lecture for chapter 9 of the opentuition course notes.
All the best.
RazaBenefits of Enterprise Risk Management (ERM)
Alignment of risk appetite and strategy.
The framework demonstrates to managers the need to consider risk toleration. They then set objectives aligned with business strategy and develop mechanisms to manage the accompanying risks and to ensure risk management becomes part of the culture of the organisation embedded into all its processes and activities.
Link growth, risk and return.
Risk is part of value creation, and organisations will seek a given level of return for the level of risk tolerated.
Choose best risk response.
ERM helps the organisation to select whether to reduce, eliminate or transfer risk (TARA)
Minimise surprises and losses.
By identifying potential loss-inducing events, the organisation can reduce the occurrence of unexpected problems.
Identify and manage risks across the organisation.
Managers will have a better understanding of risks. Also means that risk management is seen as everyone’s responsibility; experience and practice is shared accross the business and a common set of tools and techniques are used.
Provide responses to multiple risks.
For example, risks associated with purchasing, over and under supply, price and dubious supply sources might be reduced by an inventory control system that is integrated with suppliers.
Seize opportunities.
By considering events as well as risks, managers can identify opportunities as well as losses.
Rationalise capital.
ERM allows management to allocate capital better and make a sounder assessment of capital needs.
do I have to state the framework in its order or can I just state it as the way that I remember it?
Thats something you might want to confirm with the tutor… as long as you understand the concept and remember it which way works for you… I can’t see any reason that should prevent you from doing so… but still double check with the tutor.
Raza
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