FERMA says EU Company Law Directive opportunity for profession

The federation said that companies should not fear the directive’s requirements on risk and hopes that it will help spark a more joined up and enterprise-wide approach to the business. The directive stipulates under article 41 that company audit committees should ‘monitor the effectiveness of the company's internal control, internal audit where applicable, and risk management systems’. FERMA explained that this appears a ‘rather simple’ statement but is in fact one that poses big questions for board members and especially those that sit on audit committees. For this reason the federation teamed up with the European Confederation of Institutes of Internal Auditing (ECIIA) to produce a practical guide for boards and audit committees that it hopes will shed light on the ‘what’ and ‘how’ for board members.hide“Businesses should not be afraid of the 8th European Company Law Directive. The systems of control and risk management that it mandates will not act as a brake on entrepreneurial activity but underpin it, if they are effectively embedded in an organisation,” said FERMA in a joint statement that announced the new guide. Peter den Dekker, President of FERMA, said: "A good risk management system is like management systems on a racing car; they help it to go faster, further and more safely.” “What's new with the 8th European Company Law Directive is that there is a clear responsibility given to boards of directors and to their audit committees. Senior management is expected to be involved in risk management and risk taking. Directors have to give direction depending on the risk appetite of shareholders," he continued. Claude Cargou, President of ECIIA, commented: "The duty assigned to the board and its audit committee by article 41 of the 8th directive translates the expectations of capital markets for transparent and reliable information on significant current and evolving risks and on the way these risks are managed.” "Internal auditing provides objective and independent assurance on the effectiveness of organisation-wide risk and control systems. As such, it becomes one of the cornerstones of good organisational governance, supporting boards and audit committees to effectively assume their fiduciary responsibilities towards the company's stakeholders and the public," added Mr Cargou. Paul Taylor, FERMA board member and one of the authors of the guidance, said: "The guidance is practical, focused and user-friendly." He later told Commercial Risk Europe that he hoped that the guide would help stimulate a more proactive approach to risk management in many organisations and shift the emphasis from box-ticking and financial controls to the wider world of business and strategic risk management. “This directive could help raise the profile of risk management in the boardroom,” he said. The guidance: • Gives an overview of the role and responsibilities for effective risk management and control assurance for the board/audit committee, CEO and senior management, operational management and monitoring and assurance functions; • Clarifies the recommended interaction between internal control, risk management and internal audit; • Suggests good practice for board and audit committee oversights regarding the risk management processes, internal control system and internal auditing function. The new guidance is free to any interested organisation or director. FERMA and ECIIA are sending copies to members and stakeholders. It is also available on the asociations website and here.

FERMA says EU Company Law Directive opportunity for profession

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Want to read this article?

Read Next

Ferma members told AI will bring risk and reward for corporate insurance buyers

Aon’s revenues up 5% as it completes $13bn NFP deal

Warmer climate spreading risk of malaria and dengue to new regions

UN launches new net-zero insurance forum to replace NZIA

Pen extends fleet capacity deal with Zurich in Republic of Ireland

Related Articles