Better Practice Guide to disclosure against Principle 7

The 3rd edition of the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations introduced significant enhancements to Principle 7. The key recommendations on the need to set up and manage a risk committee to oversee risk, and board oversight of an annual review of the risk management framework put in place by management remain. A new recommendation on whether a listed entity has an internal audit function, how it is structured and what role it performs was introduced. Also new was Recommendation 7.4, which arose in response to an increasing focus by investors on a listed entity’s ability to create or preserve value, with a call to provide disclosure on how an entity is assessing and managing economic, environmental and social sustainability risks.

Deloitte and the Group of 100 have released a Guide to provide an overview of the key changes to Principle 7, and how to provide meaningful information to investors about whether and how the entity has effective management of material sources of risk.

The Better Practice Guide provides an overview of the key changes to Principle 7, and an understanding of the attributes of effective risk management and how it can help drive performance and top quality corporate governance.

It clarifies that it is critical that a company’s risk management and internal control framework is tailored to its individual circumstances, which accords with the ‘if not, why not’ reporting regime of the ASX Corporate Governance Council’s guidelines. The Guide does not specify or adopt a particular model or approach, but rather brings together useful local and global concepts and ideas to consider when implementing or reviewing the effectiveness of a company’s risk management framework

Intended primarily for board members, CEOs, CFOs and CROs, the Guide utilises a question and answer format so that readers can form a view regarding factors to consider when facilitating better practices in developing, implementing and embedding risk management frameworks. It seeks to help directors and audit and risk committee chairs and members, as well as key executives, understand the attributes of effective risk management and how it helps drive performance and top quality corporate governance.

To download the guide, please click here.

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