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The financial crisis has put risk management and its oversight under the spotlight. One reaction has been the publication of various reports and guidance by public bodies and regulators. The Walker Report (“A review of corporate governance in UK banks and other financial industry entities” – November 2009) is a classic example. An expectation is that Non-Executive Directors will chair Board level committees on Risk Management and Compensation. These roles are in addition to the existing involvement with the Audit Committee.

The focus of the finance regulatory authorities is upon oversight and constructive challenge of the executive. These roles are in addition to the legal or statutory responsibilities of Non-Executive Directors.

While scrutiny of the Board activities was taking place, regulatory capital and risk management requirements have evolved. This evolution has resulted in an increase breadth and detail as seen in Basel III and the EU equivalent. The increased breadth, such as the inclusion of Liquidity Risk,is further increasing the pressure on return generating activities.

It is only recently that these various factors have settled sufficiently to enable a means of easing this pressure to be developed.

The mechanism for easing the pressure is the transfer of expertise from risk management specialists to individuals actively involved in the Board and its committees. The importance of risk management is on a par with revenue generation. The focus is upon the business taking premeditated risks, within the risk appetite, and not being ambushed by risks at a later date. This understanding of risk in the context of the firm’s activities promotes the agility of the firm to achieve, or maintain, a competitive advantage.

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