Board’s Role in Risk Oversight

First, the NYSE report mandates the following:

1) Each listed company’s internal audit function must provide management and the audit committee with ongoing assessments of the company’s risk management processes and system of internal control

2) The audit committee must have a written charter that addresses the committee’s purpose. One of which is to assist in board oversight.

According to the report, the audit committee must discuss guidelines and policies to govern the process of handling risk exposure. It should also discuss the company’s major financial risk exposures and the steps management has taken to monitor and control such exposures.

The audit committee is not required to be the sole body responsible for risk assessment and management, but the committee must discuss guidelines and policies to govern the process by which risk assessment and management is undertaken.

Next, the SEC released a report of amended proxy disclosures in light of investors requesting more corporate accountability regarding risk oversight by the board. This will enable the investors to make informed investment decisions. The following information will have to be added to our reports this year,

1) Disclosure about the board’s role in risk management process, and whether the persons who oversee risk management report directly to the board as whole, to a committee, such as the audit committee, or to one of the other standing committees of the board; and whether and how the board, or board committee, monitors risk

2) Disclosure about company’s compensation policies and practices that are reasonably likely to have a material adverse effect on the company, as they relate to risk management;

3) Disclosure about board’s leadership structure and the reasons why they believe that it is an appropriate structure for the company

These disclosures are designed to enhance shareholder’s understanding of the organization’s risk management practices and the role of...