Fundamentals of Risk Management

FIgURE 
28.1
LSE corporate governance framework
1.
Membership
Board members’ responsibilities, obligations and rewards
Stakeholder expectations, rights, participation and dialogue
* Corporate Social Responsibility
Supervisory and managerial boards
2.
Accountability
3.
Delegation
4.
Remuneration
1.
Strategy
2.
CSR*
3.
Risk
4.
Audit
5.
Disclosure
Governance
of the board
Governance
by the board

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Corporate governance model
343
The importance of board member responsibilities, obligations and rewards are em-
phasized and include arrangements for:
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determining membership of the board;
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accountability of board members;
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delegation of authority from the board;
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remuneration of board members.
The responsibilities of board members must be fulfilled in five important areas,
in respect of the fulfilment of stakeholder expectations, rights, participation and
dialogue. In summary, these five areas are:
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strategic thinking, planning and implementation;
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corporate social responsibility;
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effective management of risks;
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audit and risk assurance;
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full and accurate disclosure.
The OECD principles and the LSE corporate governance framework provide the 
overall requirements and framework within which corporate governance must be 
delivered. However, the activities that are employed to deliver each of the five areas 
of stakeholder expectation will vary.
Risk management activities should be viewed within the wider framework 
of corporate governance. Although risk management is presented as a separate
component of corporate governance in the LSE framework, risk issues also underpin 
strategy, corporate social responsibility, audit and disclosure.
Non-executive directors play an important role in corporate governance. Generally 
speaking, the audit committee will be a non-executive group and represents the third 
line of defence, as described in Chapter 35. It is generally accepted that an effective 
non-executive director will:
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uphold the highest ethical standards of integrity and probity;
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support executives in their leadership of the business;
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monitor the conduct of executives;
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question, debate, challenge and make decisions objectively;
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listen to the views of others inside and outside the board;
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gain the trust and respect of other board members;
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promote the higher standards of corporate governance;
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seek compliance with the provisions of applicable governance codes.