RISK MANAGEMENT AND CORPORATE GOVERNANCE

BY

Emmanuel K. Oladimeji

A paper presentation to

PORTFOLIO AND DEBT MANAGEMENT INSTITUTE

2010

PORTFOLIO AND DEBT MANAGEMENT INSTITUTE E.K. Oladimeji Tel. 0802 322 4614 (Text Only)

1

• INTRODUCTION• Ladies and Gentlemen of the

Portfolio and Debt Management Institute, it is a pleasure to be here to coordinate this learning session on Risk Management and Corporate Governance. Learning About Risk (LAR) is one of the latest in a series of guidance themes on corporate governance worldwide.

• LAR is intended to spark thought and discussion that will lead to a better understanding of the nature of risk and of the processes of risk identification and risk assessment. This has to do with guidance on how to assess internal control using internal control framework. LAR has been published in relation to internal control “to spark thought and discussion” about risk among the governance community which in turn will help CoCo integrate risk into its upcoming guidance document on assessing internal control.

• LAR is an important contribution to the body of knowledge on risk in relation to corporate governance. It goes about sparking interest and discussion by introducing models which can be used to focus attention on risk. It also provides propositions and of questions for directors, managers and service provides.

• Interest and discussion is certainly sparked by Proposition No. 1, which defines risk as “the possibility that one or more individuals or organizations will experience adverse consequences from an event or circumstance”. The LAR acknowledges the definition goes against the grain of current thinking by its focus on harm and not harm and reward.

• “Managers are finding models helpful as support to the decision-making process for three reasons:

• the pace of change makes it less likely that patterns observed in prior experience will be reliable guides to current action;

• decisions require consideration of an increasingly complex web of interrelated factors; and,

• the magnitude of the consequences of faulty decisions makes worthwhile the cost of achieving additional rigour through the use of models”.

• The seven (7) models described in detail with examples cover virtually all common management decision and situations involving risk assessment. The seven models are:

• Strategic choices: managing risk strategically global view.

• Operational risk and control choices: refers to the controllable internal problems of compliance, efficiency, fraud, error and reporting.

• Crisis choices: these choices precede catastrophes.

• Resilience and survival choices: resilient organizations have deep pockets in terms of liquid assets, borrowing or new capital capacity, and strong relationships with stakeholders.

• Leadership choices: involves the ability to accept responsibility when things go wrong and the courage to say ‘I’m sorry’.

• Choosing to be aware: awareness of self and awareness of others.

• Intuition and the choice to deny or act: the authors argue that the acceptance of intuition is more important than plodding logic.

• Ladies and Gentlemen: there is no limit to knowledge and we at the Institute should be at the frontier of learning to learn about these principles in order to use the gleaned knowledge to improve our practices and the nation.

• Thank you for listening.

• CASE STUDY• RISK MANAGEMENT AND CORPORATE

GOVERNANCE• PERSONNEL AND RESOURCES

COMMITTEE• Monday, 29th January, 2007• Councillor S.J. Barnes (Vice-Chairman)• Councillors: F.J.D. Boot (a) V.H. Bradley

S.M. Creamer (a) A.J. Gillam I.S. Gollop G.J. Griffiths (a) R.G. Kempster (a) C.M. Luckett V.C. Pepper (a) C.N.F.W. Pratt S.J. Prew-Smith R.F. Spencer J.A. Woodward (a)

• 34 APOLOGIES FOR ABSENCE.Apologies for absence were received from Councillors Boot, Pepper and Woodward.

• 35 TO APPROVE AS A CORRECT RECORD THE MINUTES OF THE MEETING HELD ON 4 DECEMBER 2006.

• RESOLVED:

• That the minutes of the above meeting, having been circulated, be approved as a correct record and signed by the Chairman.

• 36 DISABILITY EQUALITY SCHEMEThe Head of Personnel and Management Services submitted a report that sought approval for the adoption of the Disability Equality Scheme.

• RESOLVED:

• That the Disability Equality Scheme is agreed.

• 37 APPOINTMENT OF PARISH COUNCIL REPRESENTATIVE TO THE STANDARDS COMMITTEE The Head of Legal and Democratic Services reported that the Working Party appointed to recruit an Independent Member and Parish Council representative to the Council’s Standards Committee had met and interviewed potential candidates for appointment.

• Council had appointed an Independent Member and would now be asked to consider the appointment of a Parish representative Member.

• The recommendation of the Working Party was that Mr. R Martin, a member of the Burton Joyce Parish Council be appointed to the Standards Committee.

• RESOLVED:• That the report be noted and that the

appointment of Mr. R Martin be referred to Council.

• 38 INDEPENDENT REMUNERATION PANEL The Head of Democratic Services reported that the Council’s Independent Remuneration Panel had prepared a report to Members with regard to the level of member’s allowances to be paid with effect from 1 April 2007.The report of the Panel was submitted at Appendix 1 to the report.

• RESOLVED:• To note the report and request Council to

consider the report of the Remuneration Panel to make a scheme of allowances for the year 2007/2008 in the following terms:-

• i That Basic Allowance be increased to £3,500 from 1 April 2007;

• ii That the percentage pay award made to Council staff be applied to the Basic Allowance (£3,500.00) Special Responsibility Allowances and Co-optees’ Allowance from 1 April 2007.

• iii. That the Special Responsibility Allowance paid to Members of the Licensing Act Committee be retained for the year 2007/2008.

• iv. That the Deputy Leader’s allowance revert to the level paid to a Cabinet Member in the event that political control of the Council is held by one party following the local election in May 2007.

• v. that a Special Responsibility Allowance be paid to the Mayor at the midway point between a Chairmanship and a Cabinet Member

• vi. That the Mayor Special Responsibility Allowance be increased to a point midway between that of a Cabinet Member and a Committee Chair.

• vii. That a Special Responsibility Allowance be paid to the Deputy Mayor at the level of half the allowance paid to a Committee Chair.

• 39 AUDIT SUB-COMMITTEE - TERMS OF REFERENCE – ANNUAL REVIEW Consideration was given to a referral from the Audit Sub-Committee.

• RESOLVED:• To approve the revised Terms of reference

detailed in Appendix B of the minute as follows:-Audit Activity

• To consider the head of internal audit’s annual report and opinion and a summary of internal audit activity (actual and proposed) and the level of assurance it can give over the council’s corporate governance arrangements.

• To consider summaries of internal audit reports.• To consider a report from internal audit on agreed

recommendations not implemented within a reasonable timescale.

• To consider the external auditor’s annual letter, relevant reports, and the report to those charged with governance.

• To consider specific reports as agreed with the external auditor.

• To commission work from internal and external audit.

• Risk Management• Receiving quarterly reports with respect to the

effectiveness of risk management procedures.•

• Achievement of Business Continuity Plans.• Notification of Internal Audit

recommendations in respect of Risk Management procedures.

• Regulatory Framework• To maintain an overview of the council’s

constitution in respect of contract procedure rules, financial regulations and codes of conduct and behaviour.

• To monitor the effective development and operation of risk management and corporate governance in the council.

• To monitor council policies on “Whistle blowing” and the anti-fraud and anti-corruption strategy and the council’s complaints process.

• To review the Assurance Statement of the Chief Internal Auditor (Manager of Resource Services), in support of the authority’s Statement on Internal Control.

• To consider the council’s arrangements for corporate governance and agreeing necessary actions to ensure compliance with best practice.

• Accounts• To consider the external auditor’s

report to those charged with governance on issues arising from the audit of the accounts.

• 40 CAPITAL FUNDING FOR CCTV SYSTEM - ADDITION TO CAPITAL PROGRAMME Consideration was given to a report of the Head of Cabinet Office seeking additions to the Capital Programme for CCTV.

• RESOLVED:

• To approve:-• i. The addition of £100,000 to the

Capital Programme 2006/07 to fund Phase 2 of the CCTV programme, funded by GNP.

• ii. The addition of a further £91,600 to the Capital Programme to fund Phase 3 of the CCTV programme.

• 41 GEDLING HOMES - SHADOW BOARD MEMBER EXPENSES POLICY The Head of Housing Services submitted a report that proposed the policy and payment rates for the reimbursement of expenses to Gedling Homes Shadow Board Members.

• RESOLVED:

• That with the effect from 11 January 2007:- The policy and schedule of rates for the payment of Shadow Board Member expenses submitted at Appendix 1 is approved.

• The meeting closed at 6.55 pm