Over the last few years there has been a growing trend for members of a board to become increasingly involved in risk management. Issues such as insolvency, liquidity and market risk are all more prevalent as topics for discussion and so we are seeing some boards create separate risk committees to focus specifically on these issues.
As a result of this trend, the Chartered Governance Institute published new terms of reference in June which risk committees can use as a guide for companies to adapt to their own needs if the board has decided to set up a separate board-level risk committee.
The COVID-19 pandemic, has exacerbated the need for a set of guidelines in this area to be made available. Peter Swabey, Policy and Research Director at the Chartered Governance Institute says "The guidance should be used as a starting point only from which to develop company specific terms of reference, with a remit covering the risks associated with the business of an individual entity. However, the guidance provides a long list of risks that are likely to be considered by companies and a second list of risks that are specific to certain business sectors. These examples are intended to stimulate the board's thinking as to the risks that are particularly relevant to the company, and also to prompt consideration of other risks not mentioned in the guidance but important to the individual company."
This new guidance about risk committees, which was published on 1 June, complements the updated Terms of Reference that the Institute published earlier this year for Audit, Nomination and Remuneration committees.
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