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CFO Magazine

Rising Expectations

Audit committee oversight of enterprise risk management.

April 2008
by Mark Beasley, et al./Journal of Accountancy

Recent events such as the massive trading losses at Société Générale, the subprime lending crisis and product recalls associated with Mattel's international toy manufacturing operations continue to shock financial markets and negatively impact shareholder value. These events have also fostered rising expectations for boards of directors to exert greater oversight of their organizations' risk management processes, leading in turn to the growth of enterprise risk management (ERM) as a strategic planning tool.

Not only are key stakeholders pressuring boards to get a better handle on management's process for identifying, assessing and responding to specific risks, but stakeholders are also expecting boards to anticipate far-horizon risk exposures more effectively and to monitor those risks continually to ensure that strategic and operational decisions remain aligned with the organization's risk appetite. In response, more companies are turning to ERM.

This article has been excerpted from the Journal of Accountancy. Read the full article here.