RISK COMMITTEE:

Risk management as a corporate governance issue:

The board of directors are responsible for the performance of the company,and is accountable to the shareholders.Responsibility for financial performance is not simply a matter of trying to maximize profits.There is a need to manage the risks that the company faces.Risks include

• The business risks and the strategic risks that the company faces in its operations and also

• risk of errors,fraud,lossess through mistakes and breakthroughs and other failings in the systems and processes.

 

 

Responsibility of the board for risk management and risk control:

The board of directors is responsible for safeguarding the assets of the company and protecting the value of the shareholders investment.

• The board has a duty to make sure that systems,procedures and checks are in place to prevent losses through errors,ommissions,fraud and dishonesty.Control measures to prevent or detect such losses are internal internal controls.The board has the ultimate responsibility for the effectiveness of the internal control system.

• The board is responsible for protecting the company and its resources from the risks of adverse external external events such as damage to assets from fire or flooding, losses through theft,disruption caused by natural disasters or terrorist attacks and so on.

 

Risk management as a task for management:

Risk management and internal control should be:

• planned and implemented by management and 

• monitored by the board,to ensure that effective systems of risk management and control are in place.

The cadbury report suggested that risk management should be:

• systematic

• embedded in the company procedures rather than applied occasionally and by means of external review.

The cadbury report recommend that there should be:

• a sound system of financial control and

• a broader system of risk management.

 

Role of the board committee on risk:

Executive management is responsible for designing and implementing system of internal control and risk management,and management should be accountable to the board of directors.The Board in turn should be accountable to the shareholders.The code states that the board should maintain a sound system of internal control to safeguard shareholders investment and the company's assets.

 

In order to do this th board should:

• conduct a review at least once a year of the effectiveness of the company's(or groups) system of internal controls and

• report to the shareholders that they have carried out a review.

 

The annual review by the board should cover:

• all material controls including financial,operational and compliance controls,and

• risk management systems.