This is the second installment in a series about the Committee of Sponsoring Organizations of the Treadway Commission’s updated enterprise risk management framework. Be sure to read part 1 for the full story.
This past September, the Committee of Sponsoring Organizations (COSO) of the Treadway Commission issued an updated enterprise risk management (ERM) framework, titled “Enterprise Risk Management — Integrating with Strategy and Performance,” to help business leaders understand the risks their organizations face and evaluate their impact on business performance.
While the COSO ERM guidance is designed to simplify risk management at an enterprise level, organizations can derive even more value from the framework by coupling it with the National Institute of Standards and Technology (NIST) Cybersecurity Framework (CSF), which is geared more toward day-to-day, ground-level risk management.
Comparing the COSO ERM and NIST CSF: Apples to Oranges
The two frameworks come from different organizations with differing viewpoints and guiding principles. The NIST CSF is a business-friendly framework that is currently only mandatory for entities in the critical infrastructure space. While the CSF is focused on cybersecurity, it is a departure from prior NIST efforts in that it is meant to span a wide range of levels within an organization. The CSF can be used down in the security trenches, guiding everyday decisions and the implementation of particular policies and practices. It can also be used by the chief information security officer (CISO) to provide a framework of items on which to report to the C-suite and board directors.
The COSO ERM, on the other hand, has been a staple of enterprise-level risk management. It takes a holistic view of risk across the entire enterprise, but its primary audience is the top leadership and board directors who are tasked with the management of risks, including cyber risks. For the board, it addresses oversight of management’s activities and decisions, such as alignment of resources, to ensure that positive risks are given proper consideration while negative risks are within board-approved risk appetite.
Not every cybersecurity issue will turn into a cyber risk — a potential negative impact on business objectives — that needs to involve top leadership. With its primary focus on cybersecurity, the NIST CSF is more tactically and operationally focused, while the COSO ERM helps business leaders link strategy, risks and performance to deliver value.
One of the biggest goals of the ERM is to improve executives’ understanding of the impact of risk on performance. Given the number of data breaches, exposed cloud storage units, instances of ransomware and other adverse cyber-related events that shook global economies in 2017, applying the benefit of the ERM to the cyber risk domain should be a top issue for boards and the C-suite.
There has never been a better time to understand the linkage between cyber risks, business strategy and performance, and to ensure that at all levels of the organizations are making the best decisions possible — for both today’s world and tomorrow’s cyber earthquakes.
Applying NIST CSF Functions to the COSO Enterprise Risk Management Framework
The NIST CSF includes a table that maps the framework core to various other standards. However, since we’ve yet to see a CSF-to-ERM mapping, below is an initial sketch of the mappings between the two frameworks. Let’s reiterate the list of NIST CSF functions and categories, since we’ll mention those later next to the COSO ERM principles:
The chart below shows an initial mapping of which areas of the NIST CSF are connected to the COSO ERM principles. Not surprisingly, the table shows that the CSF is rather light in its ability to ensure strong governance and culture as well as strategy and objective components, two areas in which adopting the ERM can provide significant benefits.
Linking Strategy and Performance to Cyber Risks
The NIST CSF and the COSO ERM are indeed apples and oranges, but that’s exactly what is needed to help organizations improve not only how they handle their cybersecurity operations, but also how they link strategy and performance to cyber risks. After a year full of high-profile data breaches and unprecedented ransomware attacks, these frameworks couldn’t have come at a better time.