Question

1.)List and discuss four broad categories of organizational risk exposures.

2.)What is COSO? Whis is the work of COSO important in internal control?

Answer 1

1. Four broad categories of organizational risk exposure:

Hazard - It is related to natural disasters such as storms, floods, hurricanes, blizzards and earthquakes;

Financial - It is caused by debt/ equity decisions related to financing the business. They include liquidity and solvency risks usually controlled through adequate financial and capital reserves;

Operational - It is related to the relationship of fixed and variable costs in the organization's cost structure as well as to internal process failures, system failures, personnel, legal and compliance.

Strategic - It is related to the impact on earnings or capital coming from adverse business decisions,improper implementation of decisions, or lack of responsiveness to industry changes.

2. COSO refers to Committee of Sponsoring Organization of the Treadway Commission. It has published documents on enterprise risk management and internal control which is important in COSO.