Risk managers must support their boards: Airmic publishes guidance to implementing FRC risk requirements

Risk professionals have an extensive and growing responsibility to help their boards fulfil their risk management duties, according to technical guidance from Airmic published in May.

The report, 2014 Update to the UK Corporate Governance Code, outlines the implications for both executive boards and risk professionals of the Financial Reporting Council’s (FRC) guidance on risk management and internal control, which came into effect from 1 October 2014.

According to Airmic, the FRC guidance represents a significant step change in the risk management obligations placed on the boards of companies. Indeed, the FRC explicitly states that boards must take “ultimate responsibility” for risk management and internal control. Airmic was involved throughout the consultation process and strongly endorses this message.

Airmic’s latest paper explains the key points of the guidance, and provides practical advice for both board members and risk professionals to ensure their company is compliant. It also includes practical next-steps, including a series of questions to assess the effectiveness of the company’s risk management, and a checklist of actions to be taken by risk managers.

Katie Moore, research and development manager at Airmic, was one of the authors of the report, and said that risk professionals have an increasingly important role to play: “The risk responsibilities placed on boards is getting ever tougher. More than ever they will require the support of our members to fulfil these duties.

“This report aims not only to educate board members on their new responsibilities, but also to help our members by providing them with advice on how they can help their senior management to measure and improve the effectiveness of their risk management.”

The overall message of the FRC guidance – that boards should hold ultimate responsibility for risk – very much chimes with Airmic’s own view that embedding a successful risk management culture starts at the top of a company.

This view was reflected in the report published last month by Airmic and think tank Tomorrow’s Company which argued that companies need to appoint a dedicated and senior risk leadership role.  Crucially, though, this role should not be about placing responsibility for managing risk into the hands of a few risk experts, but is about supporting the board in delivering their own risk responsibilities.  Read the full paper, Tomorrow's Risk Leadership: delivering risk resilience and business performance, here.