Leadership & Management Column / Security Leadership and Management

Founding Security on Enterprise Risk Management

Utilizing the principles, standards and methodologies of ERM and/or ISO 31000 as the foundation of security programs is vital in order to transform your security program to holistically address the full scope of the risk, threat and hazard landscape that your organization faces today and into the future. Going forward, we will provide some insight into the concepts of ERM and why it is so important to utilize ERM as the foundation of your security program.

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) established ERM as a process to deal with risks and opportunities affecting value creation or preservation and defined ERM as follows:  

“Enterprise risk management 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”.

The primary driver of the establishment of ERM and eventually ISO 31000 was the deceptive and fraudulent practices of senior management at organizations like Enron and WorldCom. The goals of ERM and ISO 31000 are to enhance internal controls and processes to ensure that, from the board of directors down through the organization, an understanding is established on how to identify, analyze and manage the organization’s risk exposure, as well as the process for approval for the acceptance of risk. 

The COSO framework established four key areas of risk in its ERM structure: Strategic, Operations, Reporting and Compliance.  Most organizations have overlaid “Reputation” as an overarching core element of their ERM program.

•  Strategic– addresses the establishment of high-level goals, aligned with and supporting an organization’s mission. 

•  Operations– addresses an organization’s ongoing management processes (as well as the effective and efficient use of its resources).

•  Reporting– addresses the reliability and accuracy of reporting (as previously mentioned, this element of ERM is primarily focused at financial reporting and most organizations now refer to this area as Financial rather than Reporting).

•  Compliance– addresses an organization’s compliance with applicable laws and regulations.

•  Reputation– addresses an organization’s level of respect and credibility held by its full range of stakeholders, including: customers, channel partners, supply chain partners, employees, shareholders and the financial markets. In addition, how an organization is viewed by regulators and other bodies responsible for oversight is vital, especially when issues arise. 

Another key step in establishing an ERM/ISO-based program is gaining a clear understanding of the Risk Culture of an organization. The organization may range from having a very liberal culture, to a highly entrepreneurial culture, to an extremely conservative culture, or may ultimately be a somewhat schizophrenic culture  . . . not being really sure of what type of culture it wants to establish when it grows up. One thing to keep in mind is that an organization’s risk culture often changes or evolves over time. Changes to an organizations risk culture are most evident when new executive leadership is brought in from the outside.

An essential step is developing a well documented risk appetite statement that is frequently and effectively communicated across the organization. This statement defines the level of risk taking that is acceptable to the organization. The statement should also establish guidelines relative to who is empowered within the organization, from a hierarchical standpoint, to make risk decisions. This portion of the statement typically defines an approval process with escalation requirements based on the type of risk and/or the potential impact to the organization. Ensuring that you have a deep understanding of the current risk culture the organization (and/or the new risk culture that the senior leadership and the board wants to establish) is extremely important as you work to develop and define a Risk Appetite statement for the organization. Ensuring that the statement is communicated on a regular basis across the organization cannot be over-emphasized. It is vital that the risk appetite statement is thoroughly understood and complied with to ensure the success and stability of the organization.

Organizations face an ever evolving and complex risk environment in today’s global economy as well as the extreme risks that are manifested around the world from both human and natural caused events. It is imperative that security practitioners gain a deep understanding of the COSO ERM and ISO 31000 philosophies and methodologies in order to assist their organizations in dealing with the global risk environment.  This article was previously published in the print magazine as "Enterprise Risk Management as a Foundation."

Did you enjoy this article? Click here to subscribe to Security Magazine. 

Recent Articles by Jerry Brennan

You must login or register in order to post a comment.



Image Galleries

ASIS 2013 Product Preview

ASIS International 59th Annual Seminar and Exhibits, September 24-27 in Chicago, Illinois, will include an exhibit hall packed with innovative security solutions. Here are some of the products that will be shown at ASIS this year.


Virtualization and Data Center Security: What You Need to Know for 2014

Data centers are increasingly becoming the center of the enterprise, and data center and cyber security is following the same path for security departments. According to Justin Flynn, a consultant at the Burwood Group, the virtualization of data centers allows enterprises to scale more easily and faster, with a smaller footprint.

However, hosting enterprise data in the cloud can make intrusion detection more difficult – how can enterprise security leaders team up with other departments to keep aware of cyber risks and traffic, and physical and data compliance during the virtual transition? How can CISOs and CSOs discuss cyber threats with the C-Suite to get the resources they need? And how can the proper infrastructure test and verify possible malicious attacks? 

More Podcasts

Security Magazine

Security June 2015 issue cover

2015 June

In this June 2015 issue of SecurityIs the security director business’s new “corporate rock star?” Find out how CSOs can become the new leaders of their enterprises through mentorships, partnerships and creatively adding business value. Also, learn how security professionals are training employees in cyber security through games. And why are deterrence and detection so important when it comes to thwarting metal thieves? Find out in this issue.

Table Of Contents Subscribe

Body Cameras on Security Officers

Body cameras are being used increasingly by police in cities across the U.S. Will you arm your security officers with a body camera?
View Results Poll Archive


Effective Security Management, 5th Edition.jpg
Effective Security Management, 5th Edition

 Effective Security Management, 5e, teaches practicing security professionals how to build their careers by mastering the fundamentals of good management. Charles Sennewald brings a time-tested blend of common sense, wisdom, and humor to this bestselling introduction to workplace dynamics. 

More Products

Clear Seas Research

Clear Seas ResearchWith access to over one million professionals and more than 60 industry-specific publications,Clear Seas Research offers relevant insights from those who know your industry best. Let us customize a market research solution that exceeds your marketing goals.


Facebook 40px 2-12-13 Twitter logo 40px 2-12-13  YouTube  LinkedIn logo 40px 2-12-13Google+

Vertical Sector Focus: Critical Infrastructures

criticalhomepagethumbFrom terrorism to vandalism, it’s preparedness, response, training and partnerships. Learn about some of the critical security issues facing this sector.

Visit the Critical Infrastructure page to read more.