Establish and maintain transparent and formal structures and policies in relation to risk and internal controls

Overview & Purpose

What This Standard Covers

This Standard focuses on the governing body's role in establishing a formal framework for risk management and internal control systems, including the formulation, review, and update of relevant documents that define authority and responsibilities within the organization.

Performance Criteria

• Oversee and define the organization’s risk appetite and internal control structures
• Adopt an appropriate schedule of matters reserved for the governing body
• Define roles of structures and individuals in risk acceptance and oversight
• Delegate or retain responsibilities for reviewing internal controls
• Ensure clarity between audit and risk structures
• Reflect the governing body’s attitude to risk in organizational structure
• Oversee procedures and practices to support formal structures and policies
• Review and monitor structures and policies regularly; address breaches in a timely manner

Knowledge & Understanding Requirements

• Understand the operation of risk management and internal control structures
• Build a risk-respecting culture within the organization
• Assess various risk management frameworks including the 'three lines of defence'
• Determine the need for specialist advice and additional resources
• Understand authority allocation among structures and individuals
• Communicate responsibilities clearly throughout the organization
• Measure performance of formal structures and policies regularly
• Learn from breaches in risk management and update policies accordingly
• Distinguish between risk management and risk oversight responsibilities

Relevent Roles

• Managers and Senior Officials
• Directors and Chief Executives
• Senior Officials of Special Interest Organizations
• Finance Managers and Chartered Secretaries
• Personnel, Training and Industrial Relations Managers
• Chartered and Certified Accountants
• Management Accountants
• Company Secretaries