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CORPORATE GOVERNANCE
AND RISK MANAGEMENT
REQUIREMET
MUST BE UNDERSTOOD
NO SURPRISES
Process should enable Management to
take correct decisions
Risks are not only BAD THINGS
HAPPENING but also GOOD THINGS NOT
HAPPENING
Some identified risks may be acceptable
as they are RESOURCES ARE NOT
UNLIMITED
Risk governance
Governance refers to the actions, processes,
Risk Management
What is Risk Management?
Internal Demand
Legacy of crises or
near misses
Real and perceived
rise in the number
and severity of risks
Corporate
governance
challenges
Methodological
Advances
Risk analytics
Shareholder Value
measures
Portfolio analytics
Systems and
databases
High-quality risk
Risk quality is a
engineering was
strategic issue and
found to be highly
an essential aspect
correlated with low
of effective
cash flow volatility, a
corporate
core value driver.
governance
procedures.
Stable cash flow is a
strong
driver
of value
Operational cash flow, risk and
expected
growth
constitute the three core drivers
of shareholder value
creation.
A clear empirical
connection was
found between risk
quality and
shareholder value
performance.
CG Principle
RM Principle
Organizati
onal
context
Stakeholde
r
involveme
nt
CG Principle
RM Principle
Organizati
onal
objectives
RM
approach
Organizations should
develop an approach tot he
management of risk that
reflects their unique
objectives. It is common for
organizations to
describe their approach
CG Principle
RM Principle
Reporting
Roles and
responsibil
ities
Organizations should
establish clear roles and
responsibilities for the
management of risk in
terms of leadership,
CG Principle
RM Principle
Support
structure
Early
warning
indicators
Organizations should
establish early warning
indicators for critical
business activities to
provide information on the
CG Principle
RM Principle
Review
cycle
As with an organizations
objectives, its internal
organization and
environment within which it
operates are continually
evolving. A sound and
effective risk process is
contingent on regular
reviews of the risks faced
and the policies, processes
and strategies it is adopting
to manage them.
Overcomin
g
barriers to
RM
There needs to be
recognition that even
though an organization has
risk management policies,
processes and strategies in
place, this will not
automatically lead to
robust, effective and
CG Principle
RM Principle
Supportive
culture
Organizations should
establish the right culture
to support management of
risk throughout the
organization. A supportive
culture will be one that
embeds risk management
into day-to-day operations
and recognises the benefits
of risk management.
Continual
improvem
ent
a narrative statement of how the listed issuer must ensure has applied the
principles set out in Part 1 of the Malaysian Code on Corporate
Governance to their particular circumstances; and
a statement on the extent of compliance with the Best Practices in
Corporate Governance set out in Part 2 of the Malaysian Code on
Corporate Governance which statement shall specifically identify and give
reasons for any areas of non-compliance with Part 2 and the alternatives
to the Best Practices adopted by the listed issuer, if any.
Paragraph 15.27(b)
A listed issuer must ensure that its board of directors
includes in its annual report a statement about the
state of internal control of the listed issuer as a group.
QUESTION
Is Risk Management a tool in good
corporate governance or a good corporate
governance is essential through proper
controls over risk management?
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