The Risk Committee of ABC Bank - Paper Example

Introduction

The Risk Committee is an autonomous committee of Board of Directors that has exclusive and sole responsibility for the oversight of managing risky practices and policies of global corporation operations and supervise operations of the global corporate risk management framework. The committee helps the Board of Directors in ABC Bank in meeting its overview responsibilities concerning the risk appetite of the bank. The risk management corporation, the framework of compliance, and the structure of governance that support it. The risk appetite is the type and level of risk a firm is willing and able to take on in its business activities and exposure, withholding its obligations and objectives to stakeholders (Srivastav, & Hagendorff, 2016). In discharging its supervisory responsibility, every committee member is entitled to depend on the expertise and integrity of those making information available to the committee on completeness and accuracy of the information and actual absent of inaccuracy of knowledge.

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Responsibilities of the Risk Committee

The risk committee in ABC Bank is set up by and from the board to align well with management as it starts a program of risk management. The main work of the risk committee is to approve and supervise wide risk of ABC Bank management practices by helping the board in over-viewing whether the executive team has assessed and identified the risks faced by the organization and began a management of risk infrastructure able to remedy those risks. The ABC Bank risk committee, oversees together with other levels of the board committee, if necessary, like credit, financial, liquidity, strategic, market, information technology, legal, security, reputational, and regulatory. The risk committee, supervising the division of responsibilities of risk related to every committee of the board as explicit as possible and execute analysis of the gap to decide on the oversight not to miss any risk.

The risk committee in the bank has the mandate to carry out an investigation into any particular matter within its responsibility scope and get assistance and advice from outside legal, others advisors, accounting, as required, to carry out its responsibilities and duties. The risk committee performs its duties as enumerated in the ABC bank charter. It approves the plan and risk management policy. Management should come up with the plan and risk management policy to be approved by the committee (Hargovan, 2019). The plan of risk management should consider the maturity of risk management of the bank and tailor it, according to the particular circumstances of the bank.

Requisite Qualifications of Risk Committee

The risk committee must incorporate a minimum of one member with experience in assessing, managing, and identifying large risk exposure, and sophisticated financial firms. The director chairs in the risk committee and is not an employee or an officer of the bank during the last three years(Cornell law school, 2020). The risk committee chair should not also be from the immediate family member.

The risk committee is made up of three or more directors as decided by the board in ABC Bank. The members comprise of non-executive and executive directors. Non-directors are included as members of the committee in ABC Bank. Each member has a comprehension of expertise or risk management that commensurate with the size of the ABC Bank capital structure, and complexity (Camilleri, 2017). The members of the committee are appointed by the board unless in the case where the chairperson is voted in by the whole board, the committee members may appoint a chairperson by vote of the majority. Moreover, the risk committee together with the whole board and committee of nominated, may well plan for succession and consider the risk of committee members. The risk committee of the bank takes the report to the whole board. They consider the required reporting line to the bank chief risk officer, chief executive, and management risk committee of the company directly or indirectly. The meeting of the committee is held quarterly or more often as dictated by circumstance.

References

Camilleri, M. A. (2017). Case Study 3: The Responsible Corporate Governance of the European Banks. In Corporate Sustainability, Social Responsibility and Environmental Management (pp. 139-159). Springer, Cham.

Cornell law school(2020).Legal Information Institute. https://www.law.cornell.edu/cfr/text/12/252.22

Hargovan, A. (2019). Chartered secretary: Banking royal commission final report: Cultural issues and implications. Governance Directions, 71(3), 128.

Srivastav, A., & Hagendorff, J. (2016). Corporate governance and bank risktaking. Corporate Governance: An International Review, 24(3), 334-345.