Fundamentals of Risk Management

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Risk governance
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documents. An annual statement of any potential ‘conflicts of interest’ should be 
required from directors and training should be provided for the board on corporate 
governance.
Also, the organization should set up appropriate committees (as listed below) 
with established terms of reference and membership of each of these committees, 
which may be established as sub-committees of the board. Reports on corporate 
governance standards, concerns and activities should be received at every board 
meeting, and these papers will often be presented by the company secretary. Such 
committees may include:
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risk management committee;
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audit committee;
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disclosures committee;
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nominations committee;
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remuneration committee.
The purpose of corporate governance is to facilitate accountability and responsibility for 
efficient and effective performance, and ethical behaviour. It should protect executives
and employees in undertaking the work they are required to do. Finally, it should ensure 
stakeholder confidence in the ability of an organization to identify and achieve outcomes
that its stakeholders value.
Purpose of corporate governance
oeCD principles of corporate governance
A basic definition of corporate governance is ‘the system by which organizations are 
directed and controlled’. Corporate governance is therefore concerned with systems, 
procedures, controls, accountabilities and decision making at the highest level and 
throughout an organization.
Because corporate governance is concerned with the way that senior manage ment 
fulfil their responsibilities and authority, there is a large component of risk manage-
ment contained in the overall corporate governance structure for every organization. 
Corporate governance is concerned with the need for openness, integrity and
accountability in decision making, and this is relevant to all organizations regardless 
of size or whether in the public or private sector.
The Organization for Economic Cooperation and Development (OECD) is 
an international organization helping governments tackle the economic, social and 
governance challenges of a globalized economy. The OECD updated (in 2015) the
set of principles for corporate governance and these are set out in Table 28.1. These 
principles focus on the development of an effective corporate governance framework 
that pays due regard to the rights of stakeholders.

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