Final answer:
The COSO framework is focused on internal control systems with five key components, while the ERM framework has a broader risk management scope including strategy and performance with eight components. The ERM is an expansion of COSO, integrating more comprehensive risk management practices across the organization.
Step-by-step explanation:
Differences Between COSO and ERM Frameworks
The COSO framework and the Enterprise Risk Management (ERM) framework have different objectives and components. The COSO framework, formally known as the Internal Control—Integrated Framework, primarily aims to help organizations effectively and efficiently develop and maintain systems of internal control. It outlines the following five components: control environment, risk assessment, control activities, information and communication, and monitoring activities.
In contrast, the ERM framework, known as the Enterprise Risk Management—Integrated Framework, is an expansion of the COSO framework and focuses on a broader perspective encompassing risk management across the entire organization. Its primary objectives are to help entities identify, assess, and manage risk, and achieve strategic objectives. The ERM framework includes the following eight components: internal environment, objective setting, event identification, risk assessment, risk response, control activities, information and communication, and monitoring.
The main difference between the two frameworks is that the ERM framework extends beyond internal controls to include aspects such as strategy and performance management. While the COSO framework is more focused on control, the ERM framework incorporates a more strategic view of risk management and how it aligns with an organization's goals.