In January, we wish each other good health and prosperity. We wish this for ourselves, our loved ones, and our companies. The beginning of the year is a good time to put the coming year, its risks, and challenges into perspective.
The Audit Committee is generally tasked by the Board of Directors with reviewing risks. The first topics that come up are:
- Our risk awareness: have we developed a common language on risk? Is there a genuine dialogue between us about risk?
- Our risk/return ambition: do we talk about risk appetite? Are we clear on risk acceptance, risk mitigation, or risk rejection?
- Our risk management approach: have we deployed a process for identifying, measuring and managing risk that extends from the field to the top of the company?
In January, the Audit Committee looks at risk mapping. It is drawn up by the internal auditor or by the risk manager when this function exists in the company. This map, which is discussed and validated with management at all levels of the company, presents the “hot topics” requiring the attention of senior management and directors.
The audit committee ensures that (1) its own perception of risks is included in the list of priority subjects, (2) the management of each of these subjects is entrusted to operational managers, (3) these managers inform the audit committee during the year of the actions taken to maintain the risk/return ratio at the most favorable level for the company.
The Chairman of the Audit Committee:
- Coordinates the scope of risk analysis when other committees may also be interested in these matters: strategy committee, ESG committee, etc.
- Ensures that committee members are competent in the area of risk: understanding of the method, ability to evaluate risk, etc.
- periodically monitors risk indicators: weak signals, occurrence of accidents, deterioration of margins, etc.
- Reports to the Board of Directors in order to ensure collegiality in risk management, i.e. the involvement and responsibility of all directors in these matters.
During the year, the Chairman of the Audit Committee will ensure that the subject of risk review is on the agenda at least twice. These meetings are intended to verify the implementation and the progressive impact of actions on risk management.
Governeo can assist your audit committee in clarifying its tasks and its risk review method.
