All about Risk Management Committee

A company needs to have a PROACTIVE APPROACH to convert a risk into an opportunity. It is important for the company to have a structured framework to satisfy that it has sound policies, procedures and practices in place to manage the key risks under the risk framework of the company.

 A risk management Committee's role is to assist the Board in establishing risk management policy, overseeing and monitoring its implementation.

• AS PER COMPANIES ACT, 2013: The Act is SILENT
• AS PER SEBI (LODR) REGULATION. 2015 [REGULATION 21]

Regulation 21 of the SEBI (LODR) regulation, 2015 deals with the Risk Management Committee and provides as under:

1)The board of directors shall constitute a Risk Management Committee.

2) The majority of members of RMC shall consist of members of the board of directors.

3) The Chairperson of the RMC shall be a member of the board of directors and senior executives of the listed entity may be members of the committee.

4) The RMC shall meet At Least ONCE IN A YEAR. (inserted by the SEBI (LODR) Amendment Regulations, 2018, w.e.f. 1-4-2019)

5) The Board of Directors shall define the role and responsibility of the RMC and may delegate monitoring and reviewing of the RISK MANAGEMENT PLAN to the committee and such other functions as it may deem fit such function shall specifically cover cyber security. [Inserted by the (LODR) (Amendment) Regulations, 2018, w.e.f. 1-4-2019]

6) The provisions of this regulation shall be applicable to top 500 listed entities, determined on the basis of market capitalisation, as at the end of the immediate previous financial year.[Effective date: April 1, 2019]

FUNCTIONS OF RISK MANAGEMENT COMMITTEE

• Establish an effective Risk Management framework and recommend to the Board the Risk Management policy and processes for the organisation.
• Set the risk tolerance limits and assess the cost and benefits associated with risk exposure.
• Review the Company's risk- reward performance to align with overall policy objectives.
• Discuss and consider best in risk management in the market and advise the respective functions.
• Assist the Board in effective operation of the risk management system by performing specializat analyses and quality reviews.
• Maintain an aggregated view on the risk profile of the Company for all categories of risk including insurance risk, market risk, credit risk, liquidity risk, operational risk, compliance risk, legal risk ,reputation risk, etc.
• Advise the Board with regard to risk management decisions in relation to strategic and operational matters such as corporate strategy, mergers and acquisitions and related matters.
• Report to the Board, details on the risk exposures and the actions taken to manage the exposures, review, monitor and challenge where necessary, risks undertaken by the Company.
• Review the solvency position of the Company on a regular basis.
• Monitor and review regular updates on business continuity.
• Formulation of a Fraud monitoring policy and framework for approval by the Board. Monitor implementation of Anti-fraud policy for effective deterrence, prevention, detection & mitigation of frauds.
• Review compliance with the guidelines on Insurance Fraud Monitoring Framework dt. 21st January, 2013, issued by the Authority.
• Appointing, removing and fixing the remuneration of the Chief Risk Officer (CRO), if any, subject to joint review with the Nomination and Remuneration Committee.

Risk Management Committee is a committee formed to oversee the risk management policy and global risk management framework of a company.