The Evolving Contours of the Board's Risk Management Function in UK Corporate Governance

Journal of Corporate Law Studies, Vol. 10, p. 279, 2010

35 Pages Posted: 26 Oct 2010

See all articles by Marc T. Moore

Marc T. Moore

University College London, Faculty of Laws; University College London, Faculty of Laws

Date Written: August 11, 2010

Abstract

The well-documented banking company failures that occurred in the UK over 2007 and 2008 have enhanced the importance and scope of the risk management function performed by boards. It is consequently a universal expectation of non-executive directors (NEDs) today that they provide high-level challenge to a company’s executive on core business risks. This article examines the recent corporate governance reforms introduced by Sir David Walker (2009) and the Financial Reporting Council (2010) as they relate to NEDs’ evolving risk oversight role. Part B documents the regulatory development of the board’s risk management function in the UK prior to 2007. Part C explains the impact of the UK banking collapses of 2007-08 in reframing boards’ risk function, and also critically assesses the key Walker and FRC recommendations in this regard. It will be demonstrated that over recent years the board’s internal control remit has shifted from one of risk management – denoting the mitigation of the extraneous adverse effects of business activities (with limited questioning of the viability of those underlying practices themselves); to one of risk moderation – whereby the inherent riskiness of a firm’s core entrepreneurial activities is now placed at the very centre of the board’s risk compass. Part D explores the relationship between NEDs’ extended risk management function today and the independent board paradigm that has been increasingly dominant within UK corporate governance over recent decades. Part E concludes with a prediction as to the future development of British board structures in light of the recent reforms.

Keywords: Corporate Governance, Risk Management, Independent Directors, United Kingdom, Banking Crisis, Regulation

JEL Classification: G28, G38, K22

Suggested Citation

Moore, Marc T. and Moore, Marc T., The Evolving Contours of the Board's Risk Management Function in UK Corporate Governance (August 11, 2010). Journal of Corporate Law Studies, Vol. 10, p. 279, 2010 , Available at SSRN: https://ssrn.com/abstract=1695986

Marc T. Moore (Contact Author)

University College London, Faculty of Laws ( email )

Bentham House
4-8 Endsleigh Gardens
London, WC1E OEG
United Kingdom

University College London, Faculty of Laws ( email )

Bentham House
4-8 Endsleigh Gardens
London, England WC1H 0EG
United Kingdom

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