Implementing Enterprise Risk Management (ERM) at Entropic Communications, Inc

This memo provides an overview of the implementation of Enterprise Risk Management (ERM) at Entropic Communications, Inc. It discusses the need for ERM, the current ERM process with the COSO framework, and suggestions for effective implementation. The memo concludes with the future prospects of ERM.

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Advanced Management Accounting
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Memo
To: Board of Directors
From:
Date: 07th January 2019
Subject: Entropic Communications, Inc Implementing Enterprise Risk Management (ERM)
Entropic was publically traded from the year 2007 on NASDAQ and was incorporated
in the year 2001, at Delaware. The memo is been written to provide an overview on the
implementation of processing of Enterprise Risk Management. While going the case I found
that Entropic is taking an immense initiative to implement ERM in order to wipe off the risk
that is seen in today`s modern era. According to the review of current status of ERM process,
I felt that some changes or improvement of implanting the ERM process is needed. The
memo is designed stating the need of ERM by Entropic, its future possibility with the
framework of COSO (Committee of Sponsoring Organizations). The memo is concluded with
the suggestions for effective implementing the ERM with its future prospects.
Implementation of a formal Enterprise Risk Management (ERM) Process
The scandal that light up the focus of Sarbanes-Oxley Act relating to the reporting of
accounting along with the internal control in 2010. This call for the urgent need of managing
to control the various risk. The documents were arranged according to the framework of
Sponsoring Organizational of the Treadway Commission (COSO) by the managers. Standard
and Poor’s Rating Services (S&P) had unified risk managing into their scores for monetary
along with the insurance corporations since 2005. The statement amended by the SEC require
further discussion on the role of board. The new standards enrolled y SEC created pressure on
the administrations to design a way out to control the risk. As the surroundings of Entropic

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favoured the implement of ERM to full fill the duties of boards of directors. Operational and
strategic risk were a part of discussion of quarterly meetings including of need of SEC filing.
The ERM outline was intended to bring into line a company’s actual risk experience with its
risk craving.
Current ERM Process with COSO Framework
The COSO Enterprise Risk Management – is defined as a process to help the
organization in identifying and managing the event that is related to risk. The six component
of the COSO ERM framework helps in managing along with providing the reasonable
assurance to meet the objectives. The components are:
 Event identification
 Risk assessment
 Risk response
 Control activities
 Communication
 Monitoring.
It is not vibrant which of the ERM apparatuses listed overhead must add importance
or that apparatuses shall add value at most. Alviniussen & Jankensgard, (2015) show that
accepting and applying ERM is a procedure that comprises a substantial extent of time
and can stretch over a few years. This would propose reviewing the earlier apparatuses
since they are additional probable to be applied than the last ERM apparatuses.
Additionally, one study has shown that corporations revealing ERM tend to reveal the
earlier apparatuses of ERM. Cohen, Krishnamoorthy, & Wright, (2017) shows that the
organization deliver the most evidence on COSO ERM apparatuses such as setting of
objectives, identifying along with assessing the risk and internal environment. Soin &

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Collier, (2013) further demonstrations that companies deliver the least evidence on the
additional COSO ERM apparatuses monitoring, communication, controlling of activities
along with the responses to risk. The leaning to reveal these previous ERM apparatuses is
most possible since these are the first apparatuses of an ERM procedure. Again, assumed
the important quantity of time to fully contrivance an ERM procedure it is not astonishing
that these are the principal apparatuses being revealed. If value is to be supplementary
from an ERM procedure, it is likely the apparatuses will perform a part. It was seen that
Entropic was not able to comprehend the full advantage of ERM as projected by COSO.
The whole process did not had an interdepartmental communication. While reviewing no
inter departmental risk was noticed. There was no scope of controlling the area that would
mitigate the risk that would arise while decreasing the risk among the different divisions
and vice versa. (Cohen, Krishnamoorthy & Wright, 2017). Monitoring the risk also lack
as per the decision that it would be tracked quarterly and the matrix of risk management
shall be done on an annual basis. This would result in the decision making of board of
directors as their voting criteria is based on quarterly basis that is based on information of
older date. The two apparatus of COSO was not involved in the ERM process of Entropic
Communication that is setting of objective and internal environment.
Suggestions
Entropic shall revise the process of ERM as to meet the quality standard. The risk in
ERM Matrix was in losing the service provider that provides a business dwarf. Implementing
of the two apparatus of COSO in the ERM process that is setting of objective along with
internal environment. As setting up objectives articulate in assessing the risk regarding the
matter that is being an obligation for the company to achieve higher goals. Setting out
objectives would help in identifying the upcoming events that possible to take place that
create a base for steering the assessment of risk. ERM process apparatus of setting objectives

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stresses on the impact of risk along with measuring the impact on achieving the goals of
business. The communication among the inter department shall be motivated along while
watching the process of ERM. Identifying of risk shall be done on quarterly basis. There shall
be an active participation of engineers and accountant in the ERM procedure. As both
engineers and accountants has rigid participation related to the internal control they can
actively participate in the process and can support in providing advantage of ERM process.
The fruit full effect of ERM process shall be seen if all the departments take active
participation in the process. The review indicated that the ERM process was only
implemented on departments and not on an entire Entropic. This results in unnoticed risk
among the inter departments. Directors would be able to have an overall view about the
activities regarding risk management along with this they would be able to discuss the status
of ERM in the addressing the requirement. Internal auditors could also be able to rely on the
process of ERM after measuring its breadth while planning audit. The unbiased aim of ERM
is to accomplish risk within a business’s risk appetite along with improvement to risk answer.
Entropic unambiguous to implement an ERM process outstanding to its arrangement with the
business’s environment. Implementing of effective ERM process would help in assessing the
information regarding the risk that persists in the organization. This would even built trust
and reliability among the new and existing stakeholders. Making the best use of resources
that are available along with reduction in the cost. This would strengthen the finance of the
organization too. As it helps the management and directors in decision making there would
be a chance for the organization to advent the innovative opportunities to expand or for
betterment. (Allan et al., 2013).
Future Prospect of ERM
ERM is being intended as a compulsion for all publically traded corporations and also
for monetary institutions. Absence of ERM would had made difficult for the members of

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boards along with the directors to address and duly liberalised their duties of taking into
account the risk factors those are associated with the voting decision making. It is marked
that effectiveness of ERM is not been highlighted or is not felt in smaller organizations on the
other hand it had become the survival prop of those companies who has multi departments.
(Gatzert & Martin, 2015). The process of ERM gives the management of the companies’
improvement in performance, stabilization, confidence along with it profitability. In the
upcoming time the ERM process would help the organizations or the companies that have
been addressing the issues. It would maintain the rating regarding providing credits along
with deteriorating the fiscal cost. Through ERM process it would be easy to receive the
maximum profits and to add the best value in the company’s books. Opting the COSO eight
apparatus in the ERM process will help in retaining the company’s longevity, assets along
with its environment. Adding value to uplift the reputation, generating new business and
utmost gaining consumer satisfaction. SEC had frame the regulations to guide and support the
companies that are being traded publically in order to provide reliable assurance for taking
into consideration the factors associated to risk.( Tekathen & Dechow, 2013). Even the rating
company Standards and Poor`s have highlighted the control of risk managing as an important
factor under their rating list. Though ERM is being on an initial development phase but in
near future there would be bodies forming up regulations that would make ERM as a
compulsory part of managing and controlling of risk and other factors for every entity that is
being publically traded.
If you have any questions or concerns or if in case there is need to have any assistance
in further developing the ERM process at your organization please feel free to reach back to
me.
Regards,

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Signature:
Reference:
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