FRC hits the road for views on board risk
23 Dec 10
Watchdog will meet with directors and investors, to judge whether new whether new Governance Code provisions are having the desired effect
The Financial Reporting Council (FRC), is to bring together company directors, investors and others to explore how companies are responding to the new UK Corporate Governance Code provision on boards’ responsibilities for risk. The FRC will consider whether the Turnbull Guidance on risk and internal control needs to be amended in the light of these meetings.
Stephen Haddrill, chief executive of the FRC, said in a speech to Audit Committee Chairs that the FRC wished to explore how companies were responding to the new principle in the UK Corporate Governance Code, that boards are responsible for determining the nature and extent of the significant risks they are willing to take in achieving their strategic objectives. He noted that there is a lot of deep reflection currently underway in boardrooms and committees, and that it was premature for the FRC to amend current guidance before new good practice had the chance to develop.
As a result, the FRC will holding a series of meetings in the New Year. Board chairs, audit and risk committee chairs, executives, investors and advisers will be invited to share their views and experience. Questions that will be on the agenda for the meetings will include:
• What are the respective roles of the board, board committees and management, and how do they interact? Where does oversight end and operational management begin?
• How are Boards determining their appetite for risk?
• What are the risks that the board needs to “own”?
• What information and advice do the board and audit committee need to carry out their responsibilities?
• How do boards obtain confidence that the risk management and internal control system function effectively at operational level?
• How do boards report effectively on these issues to shareholders?
Following the meetings, the FRC will decide how it can most usefully help boards and committees, including through an update of the Turnbull guidance on risk management and internal controls if there is a need for this.