Corporate Governance and Roles and Responsibilities
PRIOR TO THE DEVELOPMENT OF AN ENTERPRISE RISK MANAGEMENT (ERM) program, it is important to understand the relationship between corporate governance and risk management as well as examine roles and responsibilities associated with this initiative and resultant program.
Corporate governance is a vital component of risk management. It provides the necessary top-down monitoring and management of risk associated with an organization. The topics of corporate governance and risk management are closely related. Both focus on strategy and support of the strategic direction of the organization.
Given the heightened attention on risk, risk management oversight is one of the key responsibilities and functions of the board of directors. The board should be actively involved in an oversight capacity in working with management to define the organization’s strategy and objectives as well as ensure risk mitigation occurs. Risk governance and value creation are also closely associated. A well-developed and implemented governance program provides the top-down monitoring and management of risk that is necessary for an effective risk management initiative. An entity’s overall risk profile is managed through corporate governance. The board of directors should focus on general oversight and stewardship. Every organization outlines goals and implements strategies for their achievement. These strategies have associated risks that must be ...