GOVERNANCE

LEARNING OBJECTIVES
Define governance and contrast the different

roles and responsibilities within governance.

Articulate the different enterprise wide
governance principles.
Describe the changes in regulations and how
governance has evolved into its present state.
Describe the role of the internal audit function
in the governance process.
Know where to find information about
governance codes and regulations from
countries around the world.

G overnance
Is the process conducted by the board of

directors to authorize, direct, and oversee

management toward the achievement of the
organizations objectives.
Corporate governance involves a set of
relationships between a companys
management, its board, its shareholders, and
other stakeholders. It also provides a structure
through which the objectives of the company
are set, and the means of attaining those
objectives and monitoring performance are
determined.

 Strategic Decision The board is

responsible for providing strategic

direction and guidance relative to the
establishment of key business
objectives, consistent with the
organizations business model and
aligned with stakeholder priorities.
Governance Oversight focuses on
the boards role in managing and
monitoring the organizations

KEY PO IN TS
1. Governance begins with the board of

directors and its committees.

2. The board must understand and focus
on the needs of key stakeholders.
3. Day-to-day, governance is executed by
management of the organization.
4. Internal and external activities provide
management and the board with
assurances regarding the effectiveness
of governance activities.

RO LES AN D RESPO N SIBILITIES W ITH IN

G O VERN AN CE,TH E BO ARD ,AN D ITS
CO M M ITTEES
Stakeholders can be viewed as having one or

more of the following characteristics:

1. directly involved in the operation of the
organizations business. (DIRECTLY INVOLVED)
2. not directly involved, but are interested in
the organizations business. (INTERESTED)
3. neither directly involved nor interested in
the organizations business, but these
stakeholders nonetheless influence the
organization (INFLUENCE)

Com m on Stakeholders
Employees
Customers
Vendors
Shareholders/Investors
Regulatory Agencies
Financial Institutions

Types ofoutcom es
Financial
Compliance
Operations
Strategic

 RISK APPETITE The amount of risk,

on a broad level, an organization is

willing to accept in pursuit of its
business objectives.
RISK TOLERANCE The acceptable
levels of risk size and variation
relative to the achievement of
objectives, which must align with the
organizations risk appetite.

The board can best execute its governance

responsibilities by:

Establishing a governance

committee.
Articulating requirements for
reporting to the board.
Reevaluating governance
expectations periodically

To execute its governance responsibilities,senior

m anagem entis responsible for:
Ensuring that the full scope of direction and

authority delegated is understood appropriately.

Identifying the processes and activities within the
organization that are integral to executing the
governance direction provided by the board.
Evaluating what other business considerations or
factors might create a justification for delegating
a lower tolerance level to risk owners than that
delegated by the board.
Ensuring that sufficient information is gathered
from the risk owners to support its reporting
requirements to the board.

The senior m anagem ent can best execute its

governance responsibilities by:

Establishing a risk committee.

Articulating reporting requirements.
Reevaluating governance

expectations periodically.

RISK O W N ERS
The responsibilities of risk owners include:
Evaluating whether the risk management activities
are designed adequately to manage the related risks
within the tolerance levels specified by senior
management.
Assessing the ongoing capabilities of the organization
to execute those risk management activities.
Determining whether the risk management activities
are currently operating as designed
Conducting day-to-day monitoring activities
Ensure accurate information that are readily available
to senior management and the boards

RISK O W N ERS
The risk owners can best execute its
governance responsibilities by:
Presenting governance
recommendations to the risk
committee.
Reevaluating risk management
activities periodically.

ASSU RAN CE ACTIVITIES

The internal audit functions

governance responsibilities may
include any or all of the following:

 The internal audit functions

governance responsibilities may

include any or all of the following:

TH REE LIN ES O F D EFEN SE

M O D EL