The board of directors should retain overall responsibility for risk oversight; mirroring its overall responsibility for strategy. Except where there are statutory requirements, the board has the flexibility to organize itself in a manner that makes sense considering its company’s size, structure, complexity, culture and risk profile, as well as the board’s size and structure.
To enhance effectiveness, efficiency and to address specific regulatory requirements, risk oversight responsibilities can be allocated to various standing committees in keeping with the specific risks appropriate to each committee’s responsibilities. In this issue, we weigh the pros and cons for establishing a separate board risk committee and discuss appropriate roles for the potential risk committee of the board.