The COSO approach has four categories of objectives relating to: Reliability of reporting, Compliance with laws and regulations, Startegic objectives, Operational objectives
The following eight components for achieving the above four categories of objectives form the framework of ERM: Internal environment, Objective setting, Event identification, Risk assessment, Risk response, Control activities, Information and communication, Monitoring
Factors influencing the quality of ERM are: human judgement, breakdowns, collusion, cost benefit analysis and management override.
Through crisis planning, modelling and stress testing the company can train for a liquidity risk event in advance of its occurrence.
Stress testing discloses the responses available to the company in the event of a crisis by reproducing the historical examples, or by modelling pressures affecting liquidity with the 'what if' scenarios.
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