- COSO Enterprise Risk Management Integrated Framework (2004) What is ERM? ERM 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, manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives. - COSO Enterprise Risk Management Integrated Framework (2004)

ERM Objective Portfolio of Risks Stakeholder Risk Appetite

Research suggests that…. ERM is still in initial stages of development and implementation Regulated companies (financial, insurance, utilities) are the leaders in ERM sophistication Non-regulated enterprises are also practicing elements of ERM 87% of survey respondents have an ERM framework in place, with a large majority building upon COSO’s ERM framework. Source: Enterprise Risk Management: Inside and Out, The Conference Board of Canada, 2005

The Vision North Carolina State University’s College of Management launched the Enterprise Risk Management Initiative (the ERM Initiative) to provide leadership in the management of entity-wide risks for boards of directors, senior executives, and other stakeholders seeking to preserve and enhance entity value.

The Business Need While most businesses have some focus on risk management, many observers note that the process is often ad hoc in nature, with inconsistent methodologies used to track and manage various risk exposures. In these environments, typically little, if any, analysis of the interrelationships of risk silos occurs. Leadership in ERM processes is needed.

College Faculty Leadership The College Faculty Leadership College of Management faculty are actively involved in national and international ERM thought-leadership activities, including representation on the COSO Board and COSO ERM Advisory Group (www.coso.org) and participation in several ERM working group summits and ERM research activities.

Research finds that the stage of ERM adoption is positively related to: Presence of a chief risk officer Board of director independence CEO and CFO support for ERM Size of the entity Nature of industry – banking, insurance, education Source: “Enterprise Risk Management: An Empirical Analysis of Factors Associated with the Extent of Implementation,” Mark Beasley, Rich Clune and Dana HermansonJournal of Accounting and Public Policy, November/December 2005

Areas of Focus ERM Roundtables The College of Management (COM) hosts regular ERM Roundtables for members of the business community to learn about emerging enterprise risk management techniques and to exchange practical implementation ideas.

19 Roundtable events since 2004 Areas of Focus ERM Roundtables 19 Roundtable events since 2004 Over 2,000 attendees

Past ERM Roundtable Presenters Areas of Focus Past ERM Roundtable Presenters

Mark your calendar for the first Fall 2006 ERM Roundtable Date: Friday, September 22, 2006 Speaker: Don Truslow, Chief Risk Officer, Wachovia Corporation Location: McKimmon Center

Positively associated with entity size and earnings volatility Research finds that the stock market reaction to announcements of Chief Risk Officers is: Positively associated with entity size and earnings volatility Negatively associated with leverage and amount of cash on balance sheet Source: “Information Conveyed in Hiring Announcements of Executives Overseeing Enterprise-Wide Risk Management Processes,” Mark Beasley, Don Pagach and Richard Warr, NC State Working Paper

Areas of Focus Internet Resources While there is an extensive amount of publicly available information on specific risk management topics, there is opportunity for the College to host a web-based information portal that synthesizes leading edge information resources about enterprise risk management. www.erm.ncsu.edu

Graduate & Undergraduate Curriculum Areas of Focus Graduate & Undergraduate Curriculum By providing a focus on enterprise risk management issues, the ERM Initiative provides opportunities for COM faculty to integrate ERM across COM undergraduate and graduate curricula in an effort to train future corporate leaders in ERM leadership. Our goal is to expand our ERM course offerings for our graduate business students.

Responses to Issues Affecting Public Policy Areas of Focus Responses to Issues Affecting Public Policy College faculty are actively involved in national and international ERM thought leadership, including activities affecting public policy related to risk management, internal controls, and public disclosures.

Research on Enterprise Risk Management Areas of Focus Research on Enterprise Risk Management The ERM Initiative encourages and sponsors academic research on ERM issues. Because ERM has an entity-wide focus, faculty across all disciplines within the College contribute to ERM relevant research. Several COM faculty have recently published articles about ERM.

Hands-on Consulting & Speaking Opportunities Areas of Focus Hands-on Consulting & Speaking Opportunities The College works with community and business enterprises to provide hands-on guidance about effective enterprise risk management implementation and participates in making ERM related presentations at regional, national, and international professional conferences.