FRM Powerpoints 2011 Unit IVB Corporate Governance and Risk Management

FRM Powerpoints 2011 Unit IVB Corporate Governance and Risk Management

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IV. Implementing a Risk Management Program B. Corporate Governance and Risk Management
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Version: January 3, 2011 Unit IV.B The Role of Risk Management in Corporate Governance o Corporate governance o Shareholder activism o SOX o Painful lessons in risk management since 1994 p. 2 of 15
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Version: January 3, 2011 Unit IV.B The Role of Risk Management in Corporate Governance (cont.) o The report of the senior supervisors on the credit crisis of 2007 identified the following practices of firms that weathered the crisis well: n “Effective firm-wide risk identification and analysis n Consistent applications of independent and rigorous valuation practices across the firm n Effective management of funding liquidity, capital, and the balance sheet n Informative and responsive risk measurement and management reporting and practice” p. 3 of 15
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Version: January 3, 2011 Unit IV.B The Role of Risk Management in Corporate Governance (cont.) o Differences between well-performing and badly performing firms were identified as n “The balance that each firm’s senior management in general achieved between its desire to do business and its appetite for risk is reflected in the tone set for developing or enforcing controls on the resulting risks. n The role that senior management in particular played in identifying and understanding material risks and acting on that understanding to mitigate excessive risks. n The efforts that senior management undertook to surmount organizational structures that tended to delay, divert, or distort the flow of information up the management chain of the firm n The breadth and depth of cross-disciplinary discussion and communication of insight into relevant risks across the firm.” p. 4 of 15
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FRM Powerpoints 2011 Unit IVB Corporate Governance and Risk Management

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