Page 53 - COSO Guidance Book

Enterprise Risk Management | Compliance Risk Management: Applying the COSO ERM Framework | 13

Principle 8 — Evaluates alternative strategies mergers and acquisitions in order to understand the level of
The compliance function should be involved in strategy risk that may be inherited as a result of the transaction, as well
discussions from the standpoint of (1) understanding the as any C&E program integration needs and risks that may need
strategy so that the C&E program can be designed to to be addressed.
manage compliance risks appropriately and (2) advising
strategic decision makers about possible compliance risks Once strategy has been decided, the compliance function
associated with strategies under consideration. Compliance should identify and understand the implications for
risk assessment and management are most effective when the organization’s C&E program. Begin by identifying
the compliance function is fully informed prior to embarking and assessing compliance risks, as well as suggesting
on new strategic initiatives, enabling the C&E program to be modifications to internal controls aimed at mitigating
prepared to proactively address new or changing compliance compliance risk. Consider changes to training, monitoring, and
risks. The CCO should also play a role in developing new auditing plans for the C&E program, and the development of
compliance risk mitigation approaches in the context of key compliance metrics or performance indicators.
changing strategies and risk appetite, as well as assistance in
evaluating compliance risk issues associated with alternative As a strategy is being implemented, the organization may
strategies under consideration. continue to make changes to the strategy based on an
assessment of its successes and failures. This assessment
If strategic decisions made by an organization involve merger is another opportunity for the CCO to provide valuable input
or acquisition activities, it is important for compliance to be based on the C&E program’s monitoring and auditing activities,
involved early in the process so that appropriate due diligence which may have revealed a level of compliance risk that differs
focusing on compliance risks can be performed. This due from what was initially expected.
diligence is important to the decision-making process for

Table 3.3 Evaluates alternative strategies
Key • Ensure that the CCO has a seat at the table in discussions of strategies
characteristics • Solicit input and insight from the CCO regarding how strategy affects compliance risk
• Perform risk-based due diligence on merger and acquisition targets prior to execution of the transaction
• Consider implications of strategic decisions (including subsequent changes in strategy) in the design of the
C&E program

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