The regulator of major UK corporate financial reporting and disclosure, the Financial Reporting Council, now requires listed firms to evaluate periodically – annually or every three years – their systems of for the identification and management of risk, of internal control and effectiveness of the board of directors. In addition, boards must include in each annual report an explanation of the business model – "the basis on which the company generates or preserves value over the longer term . . . and the strategy for delivering the objectives of the company."
These rather onerous requirements necessitate considerable and on-going review activity that must be objective if it is to be useful . . . as opposed simply to being a compliance exercise. That suggests independent review is both valuable and desirable.
To be useful, these reviews must be considerably more than tick-box exercises. It is vital that reviewers understand the performance of the system under review in the context of its operation – its effectiveness, its constraints and feedback processes. That requires a detailed understanding of the conditions under which best practice works as well as where it breaks down. That requires extensive knowledge and experience of how boards operate in reality as well as in theory. And it is even more important for systems of identification and management of risk and for internal control.
Paradigm Risk people have the specialist knowledge and practical experience required to undertake reviews which go beyond satisfying the FRC requirement (or any other review requirement) to add real value to governance and risk processes. Contact us to find out more.