Research On COSO-ERM Framework And Enterprise Operational Risk

With the trend of globalization and economic integration,many large enterprises set up their own subsidiaries around the world,facing all kinds of operational risks including political,economic,industrial,technical and ethical sides.Fraud scandal of business entities including Enron in 2001 and financial crisis later in 2008 have been exposed into the public,making the risk control of business operations up to a common concern.In this context,the COSO-ERM framework has emerged as a theoretical guide for global enterprise risk control.However,the business environment is constantly changing.How to make the COSO-ERM framework approach into the daily operation of enterprise more sufficiently has become a new subject to research.This paper takes the operational risk environment of K company as a case analysis with the COSO-ERM framework as the theoretical basis,applies the Hierarchical Subdivision Method to analyze the operational risk control environment in K company,evaluates the effectiveness of its risk control system to improve the current risk control environment.Therefore,it has practical significance to link theory with practice.In this paper,the research background and significance of the operational risk control assessment in large multinational enterprises are first elaborated.The relevant domestic and foreign theoretical works and thesis about risk management and internal control are consulted and studied.The COSO-ERM framework and Risk Control System are put forward to analyze as the theoretical basis of the content in this paper.The operational environment and risk of K Company are introduced and analyzed.The risk control system is carried out into all business processes of K Company by adopting the Qualitative and Quantitative Combination Method.After establishing a five-level and three-grade risk scoring system for all five sub processes,the weakness in the operational environment of K Company are identified through this system which required to make the corrective measures to improve.The results of this paper indicate that it is feasible and effective to evaluate the risk control level of K Company under the COSO-ERM framework.There are five control weaknesses distributed in 4 sub-process including "human resources","purchasing","finance","warehousing and logistics".In hence,K Company needs to focus on these five weaknesses in the future period,strengthen the awareness of risk control,improve the related control activities,and re-assess them in a timely manner.It can be seen that COSO-ERM framework has practical significance to improve the risk control environment of large enterprises,meanwhile it also provides reference for our local enterprises which intend to expand overseas.