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Click here for the Risk Based Corporate Governance – The New BIS Proposals - Article   Click here for the Risk Based Corporate Governance – The New BIS Proposals - Article

Corporate Governance

Risk Based Corporate Governance - The New BIS Proposals

Dennis Cox is the Chief Executive of Risk Reward Ltd, the Global Risk Forum and chairs the Chartered Institute of Securities and investment Risk Forum based in London. In this article he briefly reviews the new Corporate Governance paper issues for comment by the Bank for International Settlements.

The Bank for International Settlements have just issued a new paper entitled "Principles for enhancing corporate governance" for comment by 15 June 2010. These build on the Organisation for Economic Co-operation and Development (OECD) principles published in 2004 which were republished by the BIS in 2006.

The principles are as follows:

Principle 1

The board has overall responsibility for the bank, including approving and overseeing the implementation of the bank's strategic objectives, risk strategy, corporate governance and corporate values. The Board is also responsible for providing oversight of senior management.

Principle 2

Board members should be and remain qualified, including through training, for their positions. They should have a clear understanding of their role in corporate governance and be able to exercise sound and objective judgment about the affairs of the bank.

Principle 3

The Board should define appropriate governance practices for its own work and have in place the means to ensure such practices are followed and periodically reviewed for improvement.

Principle 4

In a group structure, the board of the parent company has the overall responsibility for adequate corporate governance across the group and ensuring that there are governance policies and mechanisms appropriate to the structure, business and risks of the group and its entities.

Principle 5

Under the direction of the board, senior management should ensure that the bank's activities are consistent with the business strategy, risk tolerance/appetite and policies approved by the board.

Principle 6

Banks should have an independent risk management function (including a chief risk officer or equivalent) with sufficient authority, stature, independence, resources and access to the board.

Principle 7

Risks should be identified and monitored on an ongoing firmwide and individual entity basis, and the sophistication of the bank's risk management and internal control infrastructures should keep pace with any changes to the bank's risk profile (including its growth), and to the external risk landscape.

Click here for the Risk Based Corporate Governance – The New BIS Proposals Article