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As part of Australian Securities & Investments Commission’s (ASIC) focus on more intensive supervisory approaches and following the Financial Services Royal Commission, ASIC set up a Corporate Governance Taskforce (the Taskforce) to conduct proactive and targeted reviews into corporate governance practices in large listed companies.

In late 2019, the Taskforce released REP 631 – Director and officer oversight of non-financial risk outlining its observations which highlighted what happens when proper oversight and management of non-financial risks are not made a priority.

Our publication summarises the key findings, implications and practical steps for public companies to take in order to apply a greater focus to the oversight and management of non-financial risk.

Key findings in ASIC Report 631

Director and officer oversight of non-financial risk

In general the Taskforce’s findings indicate practices with regards to non-financial risk are quite immature. Key themes arising from the published final report include the following:

  • Risk appetite statements were not used well – Risk appetite and accompanying metrics for non-financial risk were immature compared to those for financial risk. Management was too often operating outside of board-approved risk appetites Board engagement with the risk appetite statement was not always evident for non-financial risks.
  • Reporting to boards was often dense and did not clearly highlight key non-financial risks – Material information about non-financial risks was often buried in dense, voluminous board packs with no clear hierarchy or prioritisation for non-financial risks.
  • Board risk committees were underutilised – Board risk committee were not effectively used to triage and prioritise non-financial risks and, particularly to consider the root causes of key risks.
  • Influence Of Board Mindset & Behaviours – The independent behavioural report identified mindsets and behaviours that were helpful to the oversight of non-financial risk as well as those that presented challenges to this task.

How we can help

Our experienced team can bring global insights and data-enabled technology solutions to address the challenges in lifting your corporate governance standards around oversight and management of non-financial risk. Our services include:

  • Board effectiveness review
  • Information flows and board reporting review
  • Review and assess the functioning of your board risk committee
  • Review of incident management reporting and processes
  • Board training around behaviours and mindsets to improve the oversight of non-financial risk.

     

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