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Governance and Culture, BOD has a primary responsibility for risk…
Governance and Culture
Introduction
Culture represents core values- beliefs, attitudes, desired behaviours, importance of understanding and accepting risk.
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BOD = supervisory board, trustees, partners or owner
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Defines desired culture
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Aligning core values, decision making and behaviour
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Attracts, develops, and retains capable individuals
Attracting, developing and retaining individuals
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BOD has a primary responsibility for risk oversight.
Management is responsible for day-to-day.
Board can delegate responsibilities to risk committee.
BOD provides expertise through skills and knowledge.
BOD must understand entities strategy and industry to be performed on relevant issues.
BOD must adjust as risks change
BOD determines and reviews periodically if it has the necessary skills/expertise.
BOD should be independent. Enhances to be objective and evaluate performance and well-being without conflict of interest.
BOD serves as a check and balance on management, ensuring best interest of stakeholders.
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Bias in decision-making has always existed. Board should understand organisational biases and challenge management to overcome and or manage them.
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Allows personnel to develop and implement practices to manage risk and align with core values.
Is aligned with the legal and management structure.
Important to define responsibilities when designing reporting lines.
External parties may influence reporting lines.
Different operating structures result in different risk profiles, affecting ERM practices
Management plans and carries out the strategy and objectives designed based on vision, mission and values.
A method used gathering info is to delegate this responsibility.
Complex organisation may have several committees that align with reporting lines and operating structure.
In small entities, ERM oversight is less formal and management is more involved in day-to-day decisions.
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Single BOD- board delegates management authority to design and implement practices.
Dual-board structure- supervisory board focusses on long term decisions and strategies.
Risk based decisions are enhanced when:
1- Delegates responsibility to the extant required
2- Specifies transaction requiring review and approval.
3- Considers new and emerging risks as part of decision-making.
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