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ACCA Strategic Professional · Strategic Business Leader · Managing, monitoring and mitigating risk

Zentra Foods, a listed manufacturer, wants its board to adopt a risk framework that links risk management to strategy-setting and performance, and that sets out five interrelated components, starting with governance and culture. Which framework best matches this requirement?

COSO's Enterprise Risk Management framework fits, because it has five components beginning with governance and culture and explicitly links risk management to strategy-setting and performance. The internal control framework concentrates on controls rather than enterprise-wide risk linked to strategy.

  1. ACOSO Enterprise Risk Management: Integrating with Strategy and PerformanceCorrect
  2. BCOSO Internal Control Integrated Framework limited to financial reporting controls
  3. CThe Turnbull-style approach limited to annual review of controls by internal audit
  4. DValue-at-risk modelling applied to the treasury portfolio

Explanation

The 2017 COSO ERM framework has five components: governance and culture; strategy and objective-setting; performance; review and revision; information, communication and reporting. It explicitly integrates risk with strategy and performance. The internal control framework focuses on controls, not strategy-linked enterprise risk, so it does not fit.

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