COSO names Paul Sobel as new chairman
Paul Sobel, vice president and chief audit executive of the paper manufacturer Georgia-Pacific, has been appointed chairman of the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, for a three-year term starting Thursday.
Sobel succeeds Robert B. Hirth Jr., who has been COSO’s chairman since 2013. Hirth recently led COSO through an update of its enterprise risk management framework, one of the most widely recognized and applied risk management frameworks in the world. The update was released last September, and Sobel served on the Advisory Council for the update. COSO also released a major update its internal control framework just a few years ago, and it too is widely used.
“Big frameworks like the internal control framework that came out in 2013 and the risk management in 2017, those don’t happen very often,” Sobel told Accounting Today when asked about his plans for the organization and its frameworks. “I think we’re transitioning into a period where I’m not sure we’ll see another large framework per se. You never know. This is a three-year term, and things could happen. But I think it’s more likely it will be a focus on expanding thought leadership and guidance relating to those areas, as well as fraud and possibly governance as part of the COSO mission. For me specifically, when the calendar flips to February 1, it’s not like it’s completely a new day dawning. There are a lot of things in progress that Bob Hirth will be handing over to me to shepherd through.”
Sobel plans to provide more guidance on using COSO’s ERM framework in the near future. “Probably the biggest thing that I consider my top priority relates to that ERM framework,” he said. “It was published in September, and there’s a compendium of examples that will be coming out in the coming weeks. I think the key will be taking it from theory to really application guidance that makes it operational.”
At Georgia-Pacific, Sobel is responsible for managing the internal audit function and providing ongoing oversight and advice on risk management and compliance programs. In addition to leading audit functions at four large companies, Sobel has held leadership roles as chairman of the global board of the Institute of Internal Auditors and as chairman of an audit committee for a privately held company that grew from $25 million to more than $200 million in revenue.
At COSO, he plans to get more involved in areas such as sustainability. COSO recently collaborated with the World Business Council for Sustainable Development on providing guidance on using the ERM framework to manage environmental, social and governance risks.
“Last week in Davos we issued an executive summary talking about how to use the COSO ERM framework to manage ESG risks, and there will be in the future some additional meat on the bones,” said Sobel. “Guidance on that will roll out in the future. Both are going to go through an exposure draft process, but I think the message there is that ideally you’d like to have COSO ERM as the foundation for all risk management type activities.”
In addition, Sobel plans to deal with providing guidance on fraud risk. “How do you attack fraud risk in alignment with the ERM model? My expectation is that for the next three years we’ll be seeing more guidance and thought leader papers coming out, whereas in the last seven or eight years, there have been some, but COSO has been pretty much completely absorbed by getting two major frameworks updated,” he said.
Hirth will be staying on in a chairman emeritus role at COSO even beyond the four and a half years he has been chairman. “Bob and I have known each other, and Bob’s going to be staying on to help with this transition,” said Sobel. “He’s been involved for about four and a half years, which is a little longer than normal for a COSO chair, but it was appropriate, as he wanted to see through the issuance of the ERM framework. Bob and I have already had several conversations, and we’ve got a transition plan that will help make sure that things that he’s aware of don’t drop because I’ve come on and haven’t had involvement with them. I think we’ll be tag teaming a few things here, but as of Thursday I’ll officially become the chair.”
Meantime, Sobel will continue to keep his job at Georgia-Pacific, where he has worked since 2011. “The COSO chairman is not a full-time job so I’m retaining my day job at Georgia-Pacific,” he said. “I’m very fortunate to have an employer that is supportive of being involved in things that can shape multiple professions globally. I’ve learned to be a pretty good juggler.”
Sobel got to know COSO better as one of the members on the Advisory Council who provided input on the ERM framework. “It did give me a better appreciation for the way COSO operates and I got to know some of the other board members better,” he said. “It was a very good opportunity to make sure that I came into this with eyes wide open.”
COSO, founded in 1985, is jointly sponsored by five prominent accounting organizations: the American Institute of CPAs, the Institute of Management Accountants, the Institute of Internal Auditors, the American Accounting Association and Financial Executives International.
“COSO is a really interesting organization,” said Sobel. “When you count up the five sponsoring organizations, and how many members around the world are affiliated with them, it’s well over half a million. It’s probably approaching 700,000, I’m guessing. It’s exciting to me to be a part of a board that is really represented by some different constituencies. There was a board meeting last week, which I participated in as an observer, and just to hear the different perspectives—the CPA perspective, the internal audit perspective, FEI brings the preparer mentality, IMA is the corporate mentality and AAA more of the educator perspective—I think that’s really what has made COSO so successful. I’m really looking forward to working with them and seeing what kind of additional knowledge capital we can develop, what kind of relationships we can forge, and hopefully I can be as successful as Bob was and his predecessors in keeping the thought leadership coming out of COSO.”