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Risk Assessment and Minimization Procedures – Role of Board

Risk Assessment and Minimization Procedures – Role of Board

By MMB Admin
Calendar

Jul 28 th 2022

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Regulation 17 of SEBI (LODR) regulations provides directives to be followed by the Board of Directors of the Company. Starting from the composition of the Board to making all the compliances in time, the role of board has been clearly defined by the regulation. It must be noted that in addition to the regular roles and responsibilities of a director, regulation 17(9) states a very crucial and specific responsibility highlighting the role of boards towards risk assessment and implementing as well as monitoring appropriate risk management plans for the Company. The regulation exactly states:

“17(9)(a) – The listed entity shall lay down procedures to inform members of the board of directors about risk assessment and minimization procedures.”

“17(9)(b) – The board of directors shall be responsible for framing, implementing and monitoring the risk management plan for the listed entity.”

Risk assessment and risk management are key aspects of the corporate governance principles and code of conduct for any Company. Having proper plans and policies in place not only ensures that the Company is heading safely towards its goals, but also enables the Company to proactively manage the uncertainties that are likely to impact the business opportunities. Directors need to develop and continuously improve practices to establish a well-defined and effective oversight function. In accordance with Section 134(3) of the Companies Act, 2013, the Company is required to include a statement indicating development and implementation of risk management policy including identification of the risk elements, if any, which in the opinion of the Board may threaten the existence of the Company.

Role of the Board

  • Boards play an extremely critical role in influencing management’s processes of implementing and monitoring risks. Board members need to have a good understanding of risk management, even when they lack expertise in that area. Boards may lean on the expertise of outside consultants to help them review company risk management systems and analyze business specific risks. As part of the annual review, boards should review risk oversight policies and procedures at the board and committee levels and assess risk on an ongoing basis. It’s helpful to familiarize the board with expectations within the industry or regulatory bodies that the organization operates in by arranging for a formal annual presentation on risk management best practices. The annual risk management review should include communication from management about lessons learned from past mistakes. While many companies are having well defined risk governance structures, however it is important for boards to continuously monitor the same and assess shortcomings for mitigation. As a best practice management must list enterprise-wide risks and map them to specific board committees for oversight. This practice can help boards to have focused approach towards individual risks and the same could be dealt more strategically.
  • Since many companies outside the financial services industry do not have a separate board risk committee, risks not assigned to a specific committee are often delegated to the audit committee. While it may be appropriate for the audit committee to take responsibility for reviewing management’s policies to manage risk, boards should take care not to overburden the audit committee with risk oversight responsibilities.
  • Here are certain specific roles that board can play to assure proper implementation and monitoring of the risk management systems in the Company. The boards shall:
  • Design a proper management plan to mitigate potential risks;
  • Define roles and responsibilities of risk management committee and seek its regular updates
  • Ensure appropriate systems for risk management are in place;
  • Consider and implement opinions of independent directors on board to ensure that the systems put in place are robust and effective;
  • Ensure that appropriate accountability framework is built where every delegation is documented and timely monitored;
  • Ensure that risk management is not functioning in isolation. Rather the same is well integrated with the overall business strategies of the Company;
  • Put in place proper policy to promote a proactive approach in reporting, evaluating and resolving risks associated with the business;
  • Review the policy from time to time and ensure its communication to all the stakeholders in the Company;
  • Develop proper guidelines with the deliberations of the Committee for identifying potential risks;
  • With the help of the committee, ensure that the aforementioned guidelines and plans are communicated to the stakeholders;
  • Ensure all controls, check and balances that are required to monitor effective implementation of robust risk management systems.

Disclosure in Board’s Report

Board of Directors shall include a statement indicating development and implementation of a risk management policy for the Company including identification therein of elements of risks, if any, which in the opinion of the Board may threaten the existence of the Company.

Approaching Risk Management Planning

A newly formed risk management committee will have many tasks ahead of them in the beginning. Their first task is to clarify the company's risk tolerance and risk profiles. The primary question they need to answer is, 'What will help the company grow the most?'

Upfront planning lessens the possibility that the board will need to be reactive toward viable threats. Clear risk management reduces the negative impact on employees, processes, technology and the general environment.

Timing can be critically important for risk management committees. Cues and triggers will assist them in knowing when they need to act. Overall, risk management committees need to communicate with information that is clear, concise and has the end goal in mind.

 

How Can MMB help you adapt mindset shifts if your Company sees stagnated growth?

MMB is on a mission to set up effective and efficient Boards in India with great Board members. With an expert team of mentors and capability to handhold Boards and leadership, MMB shall help companies to set up robust risk management program and help in selection as well as appointment of appropriate Risk Management Committee.


For more details connect with us on info@mentormyboard.com.

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Category

  • All
  • Boardrooms
  • BOARDROOMS
  • Independent Directors
  • Role of Board
  • Mindset Shifts of Boards
  • Independent Directors and Promoters
  • Sustainability / ESG
  • business implication
  • employee exits
  • COMMITTEE MEETINGS
  • Union Budget
  • Independent Director
  • Grow with Governance
  • Grow with Governance
  • INDEPENDENT DIRECTOR
  • Entrepreneurial Board
  • ESG & ITS IMPORTANCE
  • leadership coaching
  • Change Management
  • Advisory Boards
  • Boards
  • Boardroom
  • Brand Yourself as a Leader of the Company
  • Kindness
  • Are you hesitant to speak in the Boardroom!
  • Governance & ESG
  • Directors
  • Independent Directors
  • Corporate Governance
  • Leader development
  • Gratitude, Purpose
  • decision making
  • Systematic Investment Plans in Emotional Intelligence
  • Corporate Governance
  • The Board’s Role in ESG!
  • Balance Boards
  • Agility and Compassion
  • Governance and Board
  • Diversity and Inclusion
  • Directors,Promoter Directors
  • Board Members, Directors and Independent Directors
  • Board and Senior Management
  • New Directors
  • Cyber Insurance
  • Salary Increment
  • Economy Growth
  • Human Resources
  • Generating Wealth Beyond Money
  • Agile Mindset for Leadership
  • Aspiring Independent Directors
  • Board Leadership
  • Corporate Governance & Women on Boards
  • BOARD MEMBER
  • SME
  • WOMEN DIRECTOR
  • BOARD MEMBERS

Archive

  • 2021
    • April (3)
      • Will you drive your vehicle without a dashboard?
      • Are you making SIPs to improve your Emotional Intelligence
      • Corporate Governance needs a Moral Compass – Ethics in Indian Boardrooms!
    • August (9)
      • Grow with Governance: ESG is the umbrella for CSR, says Vedanta's Roma Balwani
      • Grow with Governance: PadUp Ventures' Rajat Jain Demystifies Correlation of Governance and Economic Growth
      • Grow with Governance: Family governance impacts the culture of a family-run business, says Equations Advisors' Mita Dixit
      • Entrepreneurial Board
      • NEW REGULATORY PROVISIONS RELATED TO INDEPENDENT DIRECTORS
      • ESG & ITS IMPORTANCE FROM THE POINT OF VIEW OF BOARD MEETING
      • Start early, don't wait till retirement to become an Independent Director, says Increate Value Advisors' Milind Sarwate
      • The winding road of leadership coaching in the post-pandemic era
      • Challenges of Organizational Culture Change
    • February (4)
      • Re-examination of Purpose by the Boards in Post -Pandemic Era
      • What Makes Great Boards Great! Performance Evaluation by Boards and Role of Independent Directors
      • Promoter Director – Time to become Custodian of Governance!
      • Diversity and Inclusion – The Board Perspective!
    • January (2)
      • New Directors - Have you done your due diligence
      • Cyber Security Insurance and Boards
    • July (7)
      • Why Advisory Boards Are Important for Indian Business Corporates?
      • Grow with Governance: ESG essential to repair the damage economic activities caused to the earth, says CA Shailesh Haribhakti
      • Top 10 areas to contribute in Boards as Independent Directors
      • Top 10 Questions to Ask in Boardrooms!
      • Essential HOWs of Boardroom!
      • Kindness is key
      • How to Brand Yourself as a Leader of the Company?
    • June (6)
      • Leading from the Boardroom
      • Are you hesitant to speak in the Boardroom!
      • The Neem Project a Leadership case study
      • Directors Liability in India
      • Why do promoters need Independent Directors?
      • Corporate Governance Deviation – Infosys Case Study
    • March (4)
      • Board Refreshment: Finding the Right Balance for your Board!
      • HR Governance and Board – How Important Is It?
      • Agility and Compassion: Two Pillars for Boards in the Post Pandemic Era!
      • Modernizing Governance: The Board’s Role in ESG!
    • May (3)
      • Restructuring appraisals in 2021 – Gratitude, Purpose & Meritocracy
      • How do you make your personal Brand?
      • Leadership Coaching: How does it help Leaders
    • October (2)
      • Are Independent Director’s required on the Board?
      • 'Ethics & Governance' lesson should start from school, says Federal Bank's Independent Director, Sankarshan Basu
    • September (3)
      • Grow with Governance: As an Independent Director ensure your voice is heard, says Apurva Purohit
      • Grow with Governance: Push for ESG agenda; pool CSR funds to maximise impact, says Ranganath NK, former MD of Grundfos Pumps
      • Grow with Governance: Boards should prepare companies for different risks, says National Insurance Academy's G Srinivasan
  • 2020
    • August (4)
      • WOMEN DIRECTOR-An Emerge
      • ARE YOUR BOARD MEMBERS SAVVY WITH FINANCIAL TERMS AND EXCEL IN FINANCIAL LITERACY QUOTIENT AS PER COMPANIES ACT 2013 MANDATES.
      • BOARD MEMBER SELECTION- A TASK OF PERFECTION
      • SME IPO – AN OPPORTUNITY TO CAPITALIZE YOUR BUSINESS
    • December (3)
      • Good or bad, Salary Increments always cause a heartburn among employees
      • Is Economic Progress Enough?
      • Emotional Intelligence
    • November (3)
      • Generating Wealth Beyond Money
      • "Agile Mindset for Leadership"
      • Tips for Aspiring Independent Directors
    • September (3)
      • Independent Director
      • Lean Thinking Boards
      • Corporate Governance & Women on Boards
  • 2022
    • August (1)
      • Liability of Independent Directors – An Important Aspect of Corporate Governance
    • February (4)
      • A Hero's Farewell: How to handle employee exits with dignity
      • Green Bonds: An Instrument for Financing a Sustainable Future
      • Tool for effectiveness of Board Committees - Ask Right Questions
      • Russia-Ukraine war and India’s Business Implication
    • July (2)
      • Stagnation or Evolution – Mindset Shifts of Boards when Company sees Stagnated Growth
      • Risk Assessment and Minimization Procedures – Role of Board
    • March (2)
      • A study on Sustainability Report of Container Shipping Companies.
      • India and The ESG impact of Crypto Currencies
    • May (1)
      • Independent Directors liability under GST
    • November (1)
      • Workplace Sexual Harassment and the Role of Board
    • October (2)
      • How many Boards are too many?
      • Women in Indian Boardrooms Vs Diversity = Inversely Proportionate
    • September (2)
      • Organizing for the Future – Important keys to becoming future ready
      • Are you ready to serve on the Board?