Are corporate executives understanding the effect of the board and the audit committee independence and financial knowledge on the firm’s risk management activity? Given the spate of articles recently, the answer is an overwhelming, no. Diligent Consulting seeks to develop the understanding of the relationship in order to build a sustainable business based on Risk management. Whilst there may be much awareness (although not necessarily so aware to institute remedy) in the First World, implications of this [mis]understanding are hurting organisations in the Developing World, including South Africa.
Risk management policies are the perfect laboratories for the development of the understanding of this relationship because there is an obligation on the audit committee to discuss and control risk activity. Diligent Consulting asserts that Risk management is beneficial to firms as it implies dealing with provided (sophisticated) tools that develop the capability of the executive to take mandatory complicated decisions that are in the interest of shareholders/stakeholders and whether the executive need to impose financial knowledge to achieve this goal.
Georges Dionne and Thouraya Triki of the “Centre interuniversitaire sur le risque, les politiques économiques et l’emploi” in their Working Paper 05-15: “Risk Management and Corporate Governance: The Importance of Independence and Financial Knowledge for the Board and the Audit Committee” cite that results suggest that having at least one financially knowledgeable director on the board and audit committee is a common practice in most orgainisations. Over 90% of the firms in [their] sample have an audit committee with at least three members that have financial knowledge. And yet, somewhat surprisingly, risk management still weighs low on organisational corporate governance – despite information on the benefits to the contrary.
Diligent Consulting provides executives with a thorough evaluative situation analysis, corporate governance review and implementable risk assessment measures to develop businesses in a sustainable manner focused on risk management as a foundation.