The Board determines the nature and extent of the significant risks which the company is willing to take in achieving its strategic objectives and value creation. The Board sets up a Board Risk Committee to specifically address this if appropriate.
A. Explanation

This Provision describes the Board’s role in risk management, and the formation of a Board Risk Committee (BRC).

Managing risks well is crucial to long-term corporate success. But it is not a straightforward task. At the heart of the challenge are two apparently conflicting needs. The first is the push to improve performance and the corresponding necessity to take some level of risk to achieve it. The second is to understand and manage risks to prevent unnecessary and excessive risk-taking that might lead not only to underperformance, but to the company’s demise.

Successful companies effectively and efficiently make decisions that optimise risk and reward. They are able to consider not only the downside of risk (typically associated with measures to reduce levels of risk), but equally its upside (or taking on higher levels of risk to seize opportunities).

Risk governance is the framework within which risk management operates. It is essential for the company to be clear about how and what risks are being managed. In other words, good risk governance provides management with guidance for sound and informed decision-making and effective allocation of resources.

There are, however, several ways in which risk governance can be structured within a Board:

  • Oversight by the Board. If responsibility of risk oversight is not delegated to a Board Committee (such as the BRC), the full Board needs to take on those activities and responsibilities.
  • Oversight by the Audit and Risk Committee. Here, the Board delegates oversight of the risk management and internal controls framework to the Audit Committee. Under these circumstances, the AC is commonly referred to as the Audit and Risk Committee (ARC).
  • Oversight by the BRC. The Board delegates oversight for risk management to a separate BRC which is focused entirely on risk management.
  • Oversight by the BRC and other specialist Risk Committees. The Board delegates oversight for risk management to a separate BRC. However, for areas of significant risks, the Board may require further oversight and focus support from additional specialist Risk Committees.

That said, increasingly, especially in larger and more complex companies, risk management is directed to special purpose committees, such as BRCs and other specialist Risk Committees.


B. Practice Guidance


C. Related Rules and Regulations
  • Nil.


D. CG Guides
  • Board Guide 2.6: Board Committees [Board Composition].
  • Board Guide 2.7: Committees’ Composition [Board Composition].
  • Board Guide 4.5: Risk Management [Board Duties].
  • BRC Guide 1.1: Introduction [BRC Composition].
  • BRC Guide Case Study 1B-1: Audit and Risk Committee or a Separate BRC [BRC Composition].
  • BRC Guide Appendix 1D: Risk Governance Structures [BRC Composition].
  • BRC Guide Appendix 1F: Sample BRC Terms of Reference [BRC Composition].


E. Related Articles



eGuide to CG Code
Definition of Corporate Governance
History and Structure of the Code
Role of the Board
Role of the Chair
Focus on Long Term and Sustainability
Revised Code Structure and Approach
Mandatory Principles
Provisions and Variations
Thoughtful and Meaningful Application
Board Matters
Principle 1
Provision 1.1
Provision 1.2
Provision 1.3
Provision 1.4
Provision 1.5
Provision 1.6
Provision 1.7
Principle 2
Provision 2.1
Provision 2.2
Provision 2.3
Provision 2.4
Provision 2.5
Principle 3
Provision 3.1
Provision 3.2
Provision 3.3
Principle 4
Provision 4.1
Provision 4.2
Provision 4.3
Provision 4.4
Provision 4.5
Principle 5
Provision 5.1
Provision 5.2
Provision 5.3
Remuneration Matters
Principle 6
Provision 6.1
Provision 6.2
Provision 6.3
Provision 6.4
Principle 7
Provision 7.1
Provision 7.2
Provision 7.3
Principle 8
Provision 8.1
Provision 8.2
Provision 8.3
Accountability and Audit
Principle 9
Provision 9.1
Provision 9.2
Principle 10
Provision 10.1
Provision 10.2
Provision 10.3
Provision 10.4
Provision 10.5
Shareholder Rights and Responsibilities
Principle 11
Provision 11.1
Provision 11.2
Provision 11.3
Provision 11.4
Provision 11.5
Provision 11.6
Principle 12
Provision 12.1
Provision 12.2
Provision 12.3
Managing Stakeholder Relationships
Principle 13
Provision 13.1
Provision 13.2
Provision 13.3
Practice Guidance
Board Roles and Director Duties
Board Composition and Guidance
Chairman and CEO
Board Membership
Board Performance
Procedures for Developing Remuneration Policies
Level and Mix of Remuneration
Disclosure on Remuneration
Risk Management and Internal Controls
Audit Committee
Shareholder Rights and Engagement
Engagement with Shareholders
Managing Stakeholder Relationships
eGuide Glossary

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