COSO ERM FRAMEWORK Flashcards
It is a process, effected by an entity’s board of directors, management and other personnel, applied in strategy setting and across the
enterprise, designed to identify potential events that may affect the entity, and manage risk to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives.
Enterprise Risk Management
Encompasses the tone of an organization, and
sets the basis for how risk is viewed and
addressed by an entity’s people, including risk
management philosophy and risk appetite,
integrity and ethical values, and the
environment in which they operate
Internal Environment
Pertains to ethical values, desired
behaviors and understanding of risk in the
entity.
Culture
The possibility that an event will occur and adversely affect the achievement of enterprise and objectives.
Risk
The likelihood that the company might incur a
financial loss or suffer a decline in profit, capital,
investment, or cash flows on account of the
occurrence of events and transactions.
Financial Risks
The risk that talks about how the borrower might fail to pay on the due date.
Credit Risk
The risk that is related to how the business will be unable to meet its financial obligation because of
insufficient cash.
Liquidity Risk
Volatility in the market brought
about by factors such as interest rate, fx
currency and market prices.
Market Risk
The possibility that the
business may not be able to generate
sufficient revenue, or an increase in
production and increased operating
costs might occur.
Business Risk
The risk of selecting an
inappropriate corporate strategy or the
failure of implementing an appropriate
one. This may result to failure to achieve
long term strategic goals, loss of market
share and shrinkage in corporate value.
NONFINANCIAL RISKS
Strategic Risk
The risk that the company might fail to comply with applicable laws and regulations.
Legal or Compliance Risk
The risk that
unforeseen events could result to
injuries, illnesses or even loss of lives.
Health and Safety Risk
The risk that the company might fail to control or
minimize factory wastes, emissions, and
other pollutants arising from business
activities.
Environmental Risk
The risk that reputation
or image of the company will be
damaged due to reasons such as
improper acts of corporate officers, poor
financial performance, and bad news.
Reputational Risk
The risk that the
financial statement of the company is
incorrect due to errors, lapses or failure
to apply accounting standards such as
the PFRS.
Financial Reporting Risk
