SECTION 1: BRC COMPOSITION

2 | Board Risk Committee Guide 1.1 Introduction 1.1.1 Successful companies effectively and efficiently make decisions that optimise risk and reward. This requires companies to consider not only the downside of risk (typically associated with reducing levels of risk) but equally the upside of risk (or taking on higher levels of risk to seize opportunities). The ultimate responsibility for governing risk lies with the Board. Many Boards, especially those of larger and more complex companies, establish a BRC to support and assist the Board for this purpose. 1.1.2 The Code recommends for Boards of listed companies to establish a BRC, if appropriate, to determine the nature and extent of the significant risks which the company is willing to take in achieving its strategic objectives and value creation 1 . However, it is important for Boards to be aware of the relevant industry regulations as these may mandate the formation of BRCs. For example, it is mandatory for banks and insurance companies to establish a Risk Management Committee. 1.1.3 Where a BRC is formed, it is important for the Board and the BRC members to establish appropriate foundations for success. This includes matters relating to the Board risk governance structure, the BRC structure and composition, the BRCTerms of Reference (TOR), and selecting appropriately qualified BRC members. 1.1.4 This section describes the following leading practices in the formation of the BRC: • The considerations and options for risk governance structures at the Board level. • The BRC structure, composition and authority. • The role of the Management Risk Committee (MRC) and the Chief Risk Officer (CRO) in management’s oversight of risk. • The TOR of the BRC. • The independence and objectivity requirements of the BRC. • The role of the NC in appointments to the BRC. • The selection of BRC members and the BRC Chairman. • The tenure of BRC members. 1 Provision 9.1 of the Code.