Backing from ICAEW for a “hands-off” approach to the non-financial sector
Those interested in where the current corporate governance debate will take us will be interested to note that on 12 October 2009 the Institute of Chartered Accountants of England and Wales published a report by Independent Audit Limited on risk governance in non-financial services companies.
Purpose of review
Independent Audit was asked to review the practice of risk governance by boards of non-financial service companies in order to determine whether some or all of the recommendations contained in the Walker Review should be extended to non-financial institutions and to consider whether there was any evidence supporting the need for changes to the Combined Code in relation to risk governance.
Surveying 59 non-financial service companies in the FTSE 350, the report concluded that:
- The Code’s risk governance principles remain valid;
- Risk governance in main stream companies differs significantly from that in banking and other financial institutions; and
- Recommendations which are considered to be suitable for banks and other financial institutions should not automatically be adopted in the non-financial sector.
Mirroring the conclusions set out in by the GC100, the report notes that effective risk governance still rests on human behaviour.
The report will be submitted to the FRC as part of the ongoing review of the Code. The FRC intends to publish its final report, and begin consultation on any proposed changes to the Code, before the end of the year. It is anticipated that a revised Code, if changes are adopted, will be implemented in 2010.
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