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Enterprise Risk Management
Enterprise Risk Management
Tuesday, July 21, 2015
Enterprise Risk Management Partners
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Thursday, June 19, 2014
RISK MANAGEMENT
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Tuesday, April 1, 2014
ERM - Key Questions That The Board Should Be Thinking About
1. Roles and responsibilities of the Board
The Board is
required to formalise ethical standard through a code of conduct and ensure
that organisation strategies promote sustainability. It is also expected to
formalise a Board charter.
- Is timely information provided to the Board of sufficient depth and quality to facilitate a robust Board discussion on the risks and benefits of a particular proposal?
- Has the Board spent enough time on areas of particular concern to stakeholders, including strategy and succession planning?
- How satisfied are you with the frequency and depth of the Board’s re-evaluation of the continued viability of the organisation’s strategy?
- Do you know the organisation’s ethical values? How effective is the organisation’s code of conduct in encapsulating such values?
- Do you know the operational, reputational and commercial risks and opportunities faced by the organisation regarding sustainability? How does the organisation benchmark with its peers?
- Has your CEO developed a sustainability strategy that is aligned to the organisation’s corporate ambitious? Has your CFO robustly and transparently reported the organisation’s sustainability activity?
2. Composition of the Board
The Board should establish a Nominating Committee,
chaired by a Senior Independent Director, who is responsible in overseeing the
selection and assessment of Directors. The Nominating Committee is charged with
developing a set of criteria including policies formalizing its approach to
diversity of the Board.
- Does the composition of the Board comprise independent-minded individuals who ask relevant and challenging questions in Boardroom discussion?
- Is the Nominating Committee effective in establishing a Board with a balance of needed skills and diversity of views?
- What are the impediments affecting the Board’s ability to add Directors with certain skill sets/attributes (e.g. international, technology, financial, legal, accounting, marketing expertise)?
- What are the resources (both internal and external) available to the Nominating committee to assist them in performing their duties more effectively? Examples would be the use of an industry-led independent Directors registries or a recruitment specialist.
3. Independence of Independent
Directors
The tenure of independent Directors is capped to a
cumulative period of nine years unless approved by the shareholders. Upon
completion of the nine years, such Directors can be re-designated as
non-independent Directors.
In addition, the positions of Chairman and CEO should be held by
different individuals. If the Chairman is not an independent Director, the
Board should comprise a majority of independent Directors.
- Has the Board formulated a policy on the terms of service of independent Directors
- Has the Board considered whether there is a potential conflict of interest when the roles of Chairman and CEO are combined?
- Has the Board considered whether there is an appropriate balance of power between the CEO and the independent Board members
4. Remuneration of Directors
The Board should establish formal and transparent remuneration policies
and procedures to attract and retain Directors. A Remuneration Committee can
perform this function.
- How did your Board conduct the annual Board evaluation process this year?
- How satisfied are you with the Board’s annual evaluation process? Is this conducted through self-assessment or by more objective measurements?
- Is the Directors’ remuneration made at the appropriate level to attract the right caliber and required expertise to the Board?
- Are the benefits sufficiently defined and appropriate for the role and responsibility of the Directors, and is there a difference between executive and non-executive Directors?
5. Risk management framework and
internal controls system
The Board is required to establish a sound framework to determine the organisation’s level of risk tolerance and actively identify,
assess and monitor key business risks.
- Has the Board considered how risk integrates with the Company’s overall strategy as part of its responsibility for overseeing risk?
- With many organizations increasingly expanding overseas, does the Board know enough and understand the risks of operating in foreign countries (e.g. regulatory, political and cultural risks)?
- How does the Board oversee major risks, such as risks relating to tax, regulatory, legal and information technology matters?
- How comfortable is the Board with the level of monitoring on the strategic risks identified?
6. Integrity of financial reporting
The Audit Committee should ensure financial statements
comply with applicable financial reporting standards.
- How confident are you with the reliability of the organisation’s financial reporting processes? What was the level of audit adjustments or issues in the past?
- What is the degree of manual work employed in preparing management and financial reporting?
- How reliant is management on the auditors for technical support and accounts preparation? Is the Board being kept up-to-date by Management on key developments in financial reporting?
- Are financial numbers reliable, accurate and timely? How long does it take for management to close the financial reporting books?
- Does the organization have sufficient IFRS knowledge and resources (both internal and external) to facilitate accurate financial reporting and strategic decision-making?
- What is the succession plan for the CFO and key members of the Finance team?
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Location:
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Sunday, March 9, 2014
MCCG 2012 FREQUENTLY ASKED QUESTIONS
MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012
Legend:
QUESTION
ANSWER
1. Who is the Malaysian Code on Corporate Governance 2012
(“MCCG 2012”) targeted at?
The MCCG 2012 is specifically targeted at companies listed on Bursa
Malaysia. All companies are however encouraged to adopt the principles and
recommendations of MCCG 2012 and
make good corporate governance an integral part of their business dealings and
culture.
2. How do
listed companies comply with the MCCG
2012?
The MCCG 2012 advocates the adoption of standards that go beyond the
minimum prescribed by regulation. Observance of the MCCG 2012 by companies is voluntary. However, listed companies are
required to explain in their annual reports how they have complied with the
recommendations of MCCG 2012. Listed
companies should explain and justify the reasons for non-observance of any of
the recommendations.
3. When will
the MCCG 2012 be effective?
Listed companies with financial year
ending 31 December 2012 onwards will be required to report on MCCG 2012. For example, where a
company's financial year ends on 31 December 2012, disclosure will be required
in relation to the financial year 1 January 2012 - 31 December 2012 and should
be made in the annual report published in 2013. Where a company's financial
year begins on 1 July 2012, disclosure will be required in relation to the
financial year 1 July 2012 - 30 June 2013 and should be made in the annual
report published in 2013.
Listed companies are however encouraged
to make an early transition to the principles and recommendations elaborated in
the MCCG 2012.
4. What is the
rationale for revising the Malaysian
Code on Corporate Governance 2007 (2007 Code) and replacing it with the MCCG 2012?
The 2007 Code was revised after taking into account
changing market dynamics, international developments and the need to
continuously recalibrate and enhance the effectiveness of the corporate
governance framework. The MCCG 2012
is the first major deliverable of the Corporate Governance Blueprint 2011
(Blueprint) launched by the SC in July 2011 and seeks to implement most of the
recommendations in the Blueprint.
5. How is the structure
of the MCCG 2012 different from the
previous codes?
The MCCG
2012 adopts a new structure which provides for greater clarity, more
information to companies and allows for simpler reading. Essentially, each
principle in MCCG 2012 is followed by
recommendations and commentaries.
The principles encapsulate broad
concepts underpinning good corporate governance that companies should apply.
The recommendations are specific standards that contribute towards the
principles. Listed companies are expected to adopt these standards as part of
their governance structure and processes. Each recommendation is followed by a
commentary which seeks to explain and assist companies in understanding the
recommendation.
The MCCG 2012 has included some of the best practices from the 2007
Code. For ease of reference, a comparison is provided under Table 1 in the MCCG 2012.
6. What are the
key amendments made in the MCCG 2012?
Some of the key areas that have been strengthened
in the MCCG 2012 are as follows:
Roles
and responsibilities of the board
The board is required to formalise
ethical standards through a code of conduct and ensure company strategies
promote sustainability. It is also expected to formalise a board charter.
Composition
of the board
The board should establish a Nominating Committee, chaired by a
senior independent director, who is responsible to oversee the selection and
assessment of directors. The Nominating
Committee is charged with developing a set of criteria including policies
formalising its approach to diversity of the board.
Independence
of independent directors
The tenure of independent directors is
capped to a cumulative period of nine years. Upon completion of the nine years,
such directors can be re-designated as non-independent directors or in
exceptional circumstances; the shareholders may decide that an independent
director can remain in that capacity after serving a cumulative term of nine
years. The board should provide strong justification to the shareholders and
approval from the shareholders should be obtained on a yearly basis. The
cumulative period of nine years will begin from the time when a person is first
appointed as independent director of a company.
In addition, the positions of Chairman
and CEO should be held by different individuals. If the Chairman is not an
independent director, the board should comprise a majority of independent
directors.
Commitment
of directors
The board is required to set out
expectations on time commitment for its members and protocols for accepting new
directorships.
Remuneration
of directors
The board should establish formal and
transparent remuneration policies and procedures to attract and retain
directors. A Remuneration Committee can perform this function.
Risk
management framework and internal controls system
The board is required to establish a
sound framework to determine the company's level of risk tolerance and actively
identify, assess and monitor key business risks.
Integrity
of financial reporting
The Audit Committee should ensure
financial statements comply with applicable financial reporting standards and
assess the suitability and independence of external auditors.
Relationship
between company and shareholders
The board should encourage shareholder
participation at general meetings and voting on resolutions by way of poll.
7. Where can I
obtain a copy of the MCCG 2012?
The MCCG
2012 can be downloaded from here.
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Location:
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Wednesday, February 19, 2014
NOMINATING COMMITTEE - MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012 - Part 2
... continued
The following, a commentary, is provided for Recommendation 2.1 to 2.3 and 3.1 to 3.5 of MCCG 2012. The commentaries seek to explain and provide some guidance for the recommendations.
The following, a commentary, is provided for Recommendation 2.1 to 2.3 and 3.1 to 3.5 of MCCG 2012. The commentaries seek to explain and provide some guidance for the recommendations.
PRINCIPLE 3:
REINFORCE INDEPENDENCE
The board should have policies and
procedures to ensure effectiveness of independent directors.
Recommendation 3.1
The board should
undertake an assessment of its independent directors annually.
Commentary
Independent directors
bring independent and objective judgment to the board and this mitigates risks
arising from conflict of interest or undue influence from interested parties.
The existence of
independent directors on the board by itself does not ensure the exercise of
independent and objective judgment as independent judgment can be compromised
by, amongst others, familiarity or close relationship with other board members.
Therefore, it is
important for the board to undertake an annual assessment of the independence
of its independent directors. When assessing independence, the board should
focus beyond the independent director’s background, economic and family
relationships and consider whether the independent director can continue to
bring independent and objective judgment to board deliberations. The Nominating
Committee should develop the criteria to assess independence. The board should
apply these criteria upon admission, annually and when any new interest or
relationship develops.
The board should
disclose that it has conducted such assessment in the annual report and in any
notice convening a general meeting for the appointment and re-appointment of independent
directors.
Recommendation 3.2
The tenure of an
independent director should not exceed a cumulative term of nine years. Upon
completion of the nine years, an independent director may continue to serve on
the board subject to the director’s re-designation as a non-independent
director.
Commentary
The assessment
criteria for independence of directors should also include tenure. Long tenure
can impair independence. For this reason, tenure of an independent director is
capped at nine years. The nine years can either be a consecutive service of
nine years or a cumulative service of nine years with intervals. An independent
director who has served the company for nine years may, in the interest of the
company, continue to serve the company but in the capacity of a non-independent
director.
Recommendation 3.3
The board must justify
and seek shareholders’ approval in the event it retains as an independent
director, a person who has served in that capacity for more than nine years.
Commentary
The shareholders may,
in exceptional cases and subject to the assessment of the Nominating Committee,
decide that an independent director can remain as an independent director after
serving a cumulative term of nine years. In such a situation, the board must
make a recommendation and provide strong justification to the shareholders in a
general meeting.
Recommendation 3.4
The positions of
chairman and CEO should be held by different individuals, and the chairman must
be a non-executive member of the board.
Commentary
Separation of the
positions of the chairman and CEO promotes accountability and facilitates
division of responsibilities between them. The responsibilities of the chairman
should include leading the board in the oversight of management, while the CEO
focuses on the business and day-to-day management of the company. This division
should be clearly defined in the board charter.
Recommendation 3.5
The board must
comprise a majority of independent directors where the chairman of the board is
not an independent director.
Commentary
A chairman who is an
independent director can provide strong leadership by being able to marshal the
board’s priorities more objectively. If the chairman is not an independent
director, then the board should comprise a majority of independent directors to
ensure balance of power and authority on the board.
Labels:
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MCCG 2012,
Nominating Committee,
Outsourcing,
Penang
Location:
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Wednesday, February 5, 2014
NOMINATING COMMITTEE - MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012 - Part 1
The following, a commentary, is provided for
Recommendation 2.1 to 2.3 and 3.1 to 3.5 of MCCG 2012. The commentaries seek to
explain and provide some guidance for the recommendations.
PRINCIPLE 2:
STRENGTHEN COMPOSITION
The board should have transparent policies and procedures that will assist in the selection of board members. The board should comprise members who bring value to board deliberations.
Recommendation 2.1
The board should
establish a Nominating Committee which should comprise exclusively of
non-executive directors, a majority of whom must be independent.
Commentary
The Nominating
Committee is charged with the responsibility to oversee the selection and
assessment of directors.
An effective
Nominating Committee will contribute towards ensuring that board composition
meets the needs of the company. The chair of the Nominating Committee should be
the senior independent director identified by the board.
Recommendation 2.2
The Nominating
Committee should develop, maintain and review the criteria to be used in the
recruitment process and annual assessment of directors.
Commentary
The Nominating
Committee’s responsibilities include assessing and recommending to the board
the candidature of directors, appointment of directors to board committees,
review of board’s succession plans and training programmes for the board. In
assessing suitability of candidates, considerations should be given to the
competencies, commitment, contribution and performance. The Nominating
Committee should facilitate board induction and training programmes. The
nomination and election process of board members should be disclosed in the
annual report.
The board should
establish a policy formalising its approach to boardroom diversity. The board
through its Nominating Committee should take steps to ensure that women
candidates are sought as part of its recruitment exercise. The board should
explicitly disclose in the annual report its gender diversity policies and
targets and the measures taken to meet those targets.
Recommendation 2.3
The board should
establish formal and transparent remuneration policies and procedures to
attract and retain directors.
Commentary
Fair remuneration is
critical to attract, retain and motivate directors. The remuneration package
should be aligned with the business strategy and long-term objectives of the
company. Remuneration of the board should reflect the board’s responsibilities,
expertise and complexity of the company’s activities.
The board should establish a Remuneration
Committee to perform this function. The Remuneration Committee should consist
exclusively or a majority of, non-executive directors, drawing advice from
experts, if necessary. Companies without a Remuneration Committee should have
board policies and procedures on matters that would otherwise be dealt with by
the Remuneration Committee. Board remuneration policies and procedures should
be disclosed in the annual report.
Continued ...
Labels:
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MCCG 2012,
Nominating Committee,
Outsourcing,
Penang
Location:
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Sunday, January 19, 2014
MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012
The MCCG 2012, like
all corporate governance codes, advocates the adoption of standards that go
beyond the minimum prescribed by regulation. The observance of the MCCG 2012 by
companies is voluntary. Listed companies are however required to report on
their compliance with the MCCG 2012 in their annual reports. The MCCG 2012
takes effect on 31 December 2012.
Where a company's financial year ends on 31 December 2012, disclosure will be required in relation to the financial year 1 January 2012 - 31 December 2012 and should be made in the annual report published in 2013. Where a company's financial year begins on 1 July 2012, disclosure will be required in relation to the financial year 1 July 2012 - 30 June 2013 and should be made in the annual report published in 2013.
The following, a commentary, is provided for Recommendation 6.1 and 6.2 of MCCG 2012. The commentaries seek to explain and provide some guidance for the recommendations.
The following, a commentary, is provided for Recommendation 6.1 and 6.2 of MCCG 2012. The commentaries seek to explain and provide some guidance for the recommendations.
PRINCIPLE 6:
RECOGNISE AND MANAGE RISKS
The
board should establish a sound risk management framework and internal controls
system.
Recommendation 6.1
The board should establish a sound framework to manage risks.
Commentary
The board should determine the company’s level of risk tolerance and
actively identify, assess and monitor key business risks to safeguard
shareholders’ investments and the company’s assets. Internal controls are
important for risk management and the board should be committed to
articulating, implementing and reviewing the company’s internal controls
system. Periodic testing of the effectiveness and efficiency of the internal
controls procedures and processes must be conducted to ensure that the system
is viable and robust. The board should disclose in the annual report the main
features of the company’s risk management framework and internal controls
system.
Recommendation 6.2
The board should establish an internal audit function which reports
directly to the Audit Committee.
Commentary
The board should establish an internal audit
function and identify a head of internal audit who reports directly to the
Audit Committee. The head of internal audit should have the relevant
qualifications and be responsible for providing assurance to the board that the
internal controls are operating effectively. Internal auditors should carry out
their functions according to the standards set by recognised professional
bodies. Internal auditors should also conduct regular reviews and appraisals of
the effectiveness of the governance, risk management and internal controls
processes within the company.
Labels:
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GLC,
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Listed Companies,
Malaysia ERM,
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Location:
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