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Study enterprise risk management (ERM) with Professor Farhat. This 13-lesson course combines an introduction to business risk, the five components of COSO ERM, and practical lessons with multiple-choice questions on risk identification, assessment, prioritization, response, and monitoring. Designed for accounting and business students, CMA Part 2 candidates, and CPA BAR candidates.
STUDY IN ORDER
• Lessons 1–2: ERM fundamentals, types of business risk, and an introductory MCQ.
• Lessons 3–7: the five COSO ERM components—Governance and Culture; Strategy and Objective-Setting; Performance; Review and Revision; and Information, Communication, and Reporting.
• Lessons 8–9: risk identification and a worked question.
• Lessons 10–11: risk assessment and prioritization, followed by an expected-loss question.
• Lessons 12–13: risk response and monitoring, followed by a question about insurance and risk transfer.
WHAT YOU WILL LEARN
Connect governance, culture, strategy, and performance to risk management. Compare inherent and residual risk, risk appetite and tolerance, likelihood and impact, and key risk indicators versus performance indicators. Practice recognizing risk responses and explaining why a response fits the scenario.
QUICK ANSWERS
What is ERM? It is an organization-wide approach to managing uncertainty in relation to strategy, objectives, performance, and value.
How many components are in the COSO framework used here? The 2017 ERM framework has five interrelated components supported by 20 principles. It is distinct from COSO's Internal Control—Integrated Framework.
What is inherent versus residual risk? Inherent risk is considered before the effect of risk responses; residual risk is what remains after those responses.
How do risk appetite and risk tolerance differ? Appetite describes the broad types and amount of risk an organization is willing to accept in pursuing value. Tolerance sets acceptable variation or boundaries in relation to particular objectives or performance.
How do you calculate expected loss in a simple scenario? Multiply the probability of the loss event by its financial impact. Expected loss is not the same as the maximum possible loss.
Does insurance eliminate risk? Insurance can transfer or share specified financial consequences, but exclusions, deductibles, and other exposures may remain.
HOW TO PRACTICE
Identify the objective and risk before choosing a response. For each MCQ, explain the reason for your answer and why the other choices do not fit. Pair each practical concept lesson with the question immediately following it.
FRAMEWORK AND EXAM REFERENCES
COSO ERM guidance: https://www.coso.org/guidance-erm
CMA study resources: https://www.imanet.org/ima-certifications/cma-certification/prepare
CPA exam content: https://www.aicpa-cima.com/resources/article/learn-what-is-tested-on-the-cpa-exam
Use this course with your current syllabus and distinguish the ERM framework from internal-control frameworks when answering questions.
