TORONTO, July 12, 2012 /CNW/ - Boards should take a more active and
direct role in the oversight of enterprise risk according to a new
publication from the Canadian Institute of Chartered Accountants
Enterprise risk management focuses on how much uncertainty a company is
willing to accept as it strives to grow. The need for enhanced board
oversight comes with an economy that remains unsettled in the aftermath
of the financial crisis.
The CICA's A Framework for Board Oversight of Enterprise Risk is unique in that it focuses specifically on the board's role in terms
of risk. It goes beyond principles to provide valuable guidance and
tools to help directors discharge their responsibilities. The
framework was authored by John Caldwell, a chartered accountant,
drawing on his extensive experience as a corporate director and CEO.
"While boards should not be involved in day-to-day risk management, the
oversight role should not be passive or too reliant on management,"
said Caldwell. "In fact, risks associated with leadership and strategy
are areas where a board should assert itself more directly, since
management may not be able to objectively assess its own performance
from a risk perspective."
The CICA framework encourages boards to take a more holistic approach to
risk by understanding an organization's vulnerabilities and the
interrelationships and interdependencies between risks. "Effective
board oversight of risk requires rigour, objectivity, a heightened
sense of risk's importance, and most importantly, the recognition that
unforeseen events and circumstances can and often do occur," said
The framework provides a practical approach for boards to address risk.
The goal is to help directors:
Better identify and address critical risks
Understand how risks are interconnected
Recognize the potential compounding effect of risks should unfavourable
events occur at the same time
Develop appropriate risk tolerance and risk appetite levels
"Risk management and board oversight should not be strictly premised on
risk avoidance," stressed Caldwell. "Every organization is exposed to
and takes risks daily. Effective risk management involves balancing
risks and rewards ultimately to improve performance and shareholder
Caldwell added that there is no single implementation model for risk
oversight because of the unique circumstances of each organization and
its board of directors. Each board must determine its own appropriate
The framework was commissioned by the CICA's Risk Oversight and
Governance Board and is available online (www.cica.ca/riskoversight).
Chartered Accountants (CAs) are Canada's most valued, internationally recognized profession of
leaders in senior management, advisory, financial, tax and assurance
roles. Through their integrity, expertise, and internationally
recognized qualification standards, Canada's 82,000 CAs sustain their
influence and leadership position both in Canada and globally. As
trusted business advisors to Canadian organizations of all sizes,
Canada's CAs foster confidence in Canadian business and contribute to
the health and sustainability of Canada's capital markets and economy.
The Canadian Institute of Chartered Accountants (CICA) represents
Canada's CA profession both nationally and internationally. The CICA is
a founding member of the International Federation of Accountants (IFAC)
and the Global Accounting Alliance (GAA).
SOURCE Canadian Institute of Chartered Accountants
For further information:
Tobin Lambie, Manager, Media, CICA
Chartered Accountants of Canada
277 Wellington Street West
Toronto, ON Canada M5V 3H2
Tel: 416 977.3222 Fax: 416 977.8585
Comptables agréés du Canada
277, rue Wellington Ouest
Toronto (ON) Canada M5V 3H2
Tél. : 416 977.3222 Téléc. : 416 977.8585