FERMA:“Response to theconsultationdocument GreenPaper on corporategovernance”
FERMA have formally presented their response to the European Commission• The Federation of European Risk Management  Assoc...
How FERMA have structured their response?                          Specific    Opening remarks                      Other ...
OPENING REMARKS• FERMA welcomes the Commission’s goals                                                        Europe’s gro...
Article 41                  A CLOSE                      CORRELATION/REDUND                             ANCY              ...
The Guidance Paper• In September 2010, FERMA and ECIIA published a  Guidance for Boards and Audit Committees on how to  ex...
FERMA supports the Directive• FERMA welcomes the Commission’s aim to ensure  that companies publish accurate and responsib...
Concentrating on effective use of existingDirective’s rules is essential                         EXISTING                 ...
The right balance• When considering the next steps, FERMA respectfully  urges the Commission to make certain the right bal...
RISK MANAGEMENT ISSUES  In this section, FERMA provides its response to questions raised by the               Commission
Does FERMA agree that the board should approveand take responsibility for the company’s “riskappetite”?    Key role in    ...
Should risk management be reported meaningfullyto shareholders?    FERMA does not necessarily agree that the explicit disc...
Should disclosure arrangements alsoinclude relevant key societal risks?                             KEY SOCIETAL          ...
Is there a need for further disclosure about riskappetite?       FERMA does not support the proposition to disclose more  ...
Should the board ensure that the company’s riskmanagement arrangements are effective andcommensurate with the company’s ri...
Should EU corporate governance measures takeinto account the size of listed companies?   FERMA considers that the principl...
Should a differentiated and proportionate regimefor small and medium-sized listed companies beestablished? Are there any a...
Should any corporate governance measures betaken at EU level for unlisted companies?                                      ...
Should companies departing from therecommendations of corporate governance codesbe required to provide detailed explanatio...
Should monitoring bodies be authorised to checkthe informative quality of the explanations in thecorporate governance stat...
Further details• Further detail on the FERMA and ECIIA Guidance  Paper on monitoring the effectiveness of internal  contro...
• FERMA presented their response to the European  Commission by letter dated 22nd July 2011• ADD FERMA’s CONTACT DETAILS  ...
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Ferma's response to the consultation document green paper on corporate governance

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The Federation of European Risk Management Associations (FERMA) has told the European Commission that it should start with “implementation and robust enforcement” of existing EU corporate governance rules on risk management, rather than creating new ones now.

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Ferma's response to the consultation document green paper on corporate governance

  1. 1. FERMA:“Response to theconsultationdocument GreenPaper on corporategovernance”
  2. 2. FERMA have formally presented their response to the European Commission• The Federation of European Risk Management Association (“FERMA”) welcomed the opportunity to comment on the European Commission’s staff working document: “Green Paper on the EU corporate governance framework”
  3. 3. How FERMA have structured their response? Specific Opening remarks Other corporate comments on in support of governance the risk better corporate issues dealing management governance in with risk aspects of the the EU management green paper• FERMA makes reference to “the Directive” and “the Guidance Paper” where relevant throughout the response
  4. 4. OPENING REMARKS• FERMA welcomes the Commission’s goals Europe’s growth depends on ambitious Create a strong and successful single market initiatives, including further market integration where appropriate Ensure that corporate governance rules and As a leading forum for practices are fit for purpose risk management professionals, this is a matter close to members’ hearts Nevertheless, FERMA argues that the document is overlapping the EU 8th Company Law Directive which has yet to be fully harmonised.
  5. 5. Article 41 A CLOSE CORRELATION/REDUND ANCY ASPECTS OF THE 8TH EU COMPANY PAPER LAW DIRECTIVE REGARDING ON STATUTORY “The Directive” DISCLOSURE AUDIT Most specifically the duty of the board and audit committee to provide TRANSPARENT and RELIABLE information on significant and evolving risks and the way these risks are managed
  6. 6. The Guidance Paper• In September 2010, FERMA and ECIIA published a Guidance for Boards and Audit Committees on how to exercise this duty (“the Guidance Paper”) Aspects of the FERMA/ECIIA Guidance Paper are referred to within FERMA’s response FERMA recognises that the Directive is not fully harmonised, and therefore Member States have the flexibility to be more or less stringent Member States’ implementation should be further analysed before the Commission takes any further action to regulate this duty
  7. 7. FERMA supports the Directive• FERMA welcomes the Commission’s aim to ensure that companies publish accurate and responsibly produced information, which goes beyond superficial compliance or mere “ticking the box”• FERMA considers risk management must not be only used as an additional internal control system, but more than that as a real tool for decision-making But... this does not necessarily require new regulatory approaches
  8. 8. Concentrating on effective use of existingDirective’s rules is essential EXISTING RULES ROBUST IMPLEMENTATION ENFORCEMENT OF EQUAL IMPORTANCE:
  9. 9. The right balance• When considering the next steps, FERMA respectfully urges the Commission to make certain the right balance is struck Investor protection Ensuring EU-based companies compete fairly with their competitors in other regions of the world
  10. 10. RISK MANAGEMENT ISSUES In this section, FERMA provides its response to questions raised by the Commission
  11. 11. Does FERMA agree that the board should approveand take responsibility for the company’s “riskappetite”? Key role in setting an Board should be supported in these duties organisation’s risk appetite FERMA believes it’s “three lines of defence” important that the board should include members with experience and OPERATIONAL THE awareness of risk MANAGEMENT BOARD management, ideally in the context of the company’s business RISK MANAGEMENT activities & COMPLIANCE Monitoring senior management’s response to INTERNAL AUDIT risk
  12. 12. Should risk management be reported meaningfullyto shareholders? FERMA does not necessarily agree that the explicit disclosure of a company’s risk appetite to shareholders is the most appropriate course of action Reporting to shareholders should strike an appropriate balance between providing meaningful information on which to base investment decisions and investment protection, which inevitably requires a certain level of confidentiality A great deal of information is already disclosed: financial reporting provides an indication of the company’s approach (debt, gearing etc.) and other aspects can be implied from the risk management reports FERMA believes this is sufficient
  13. 13. Should disclosure arrangements alsoinclude relevant key societal risks? KEY SOCIETAL RISKS ARE ALREADY HIGHLY REGULATED & REPORTING EXPECTATIONS ALREADY ADVANCED Health & Environmental Safety Protection However, FERMA believes there may be scope for improving reporting as regards corporate social responsibility (“CSR”). FERMA would support further European work to develop this.
  14. 14. Is there a need for further disclosure about riskappetite? FERMA does not support the proposition to disclose more information about risk appetite Why? MAY HARM COMPANIES’ COMPETITIVE POSITION WILL NOT IMPROVE COMPANIES’ RISK MANAGEMENT CULTURE WILL NOT PROVIDE MORE ASSURANCE TO STAKEHOLDERS THAT RISKS ARE BETTER UNDER CONTROL FERMA would support any initiative encouraging companies to implement a risk management system as a management tool in order to enhance their development and empower the control on their activities
  15. 15. Should the board ensure that the company’s riskmanagement arrangements are effective andcommensurate with the company’s risk profile?• FERMA supports the Commission’s view that the board should ensure proper oversight of the risk management process and that it should set company-wide risk policy FERMA’s view of the Board’s responsibilities Endorse the Include, as company’s appropriate, Bear primary strategy and Clearly define the contributions of responsibility for monitor its risk management other defining the risk operation for roles and stakeholders management effectiveness responsibilities profile of the throughout the company company
  16. 16. Should EU corporate governance measures takeinto account the size of listed companies? FERMA considers that the principles of corporate governance should apply to all companies, irrespective of their size
  17. 17. Should a differentiated and proportionate regimefor small and medium-sized listed companies beestablished? Are there any appropriate definitionsor thresholds? SIZE FERMA advocates a “proportionate COMPLEXITY OF BUSINESS approach”, taking OPERATIONS into account a variety of factors GEOGRAPHICAL SCOPE when applying measures to SECTOR individual companies RISK PROFILE
  18. 18. Should any corporate governance measures betaken at EU level for unlisted companies? EU corporate governance should be applied to unlisted FERMA believes companies on a voluntary basis only• This would not prevent unlisted companies from taking voluntary initiatives to ensure they apply good Disclosure corporate governance measures requirements should be different for• Opportunities should be made companies that do available to encourage them to do not raise capital on this the stock markets
  19. 19. Should companies departing from therecommendations of corporate governance codesbe required to provide detailed explanations forsuch departures and describe the alternativesolutions adopted? FERMA agrees that a fundamental principle of such codes is “comply or explain” and so would encourage companies to provide explanations and outline, where possible, the reasons for taking an alternative course of action
  20. 20. Should monitoring bodies be authorised to checkthe informative quality of the explanations in thecorporate governance statements and requirecompanies to complete the explanations wherenecessary? FERMA considers monitoring bodies should assure the information quality in compliance with their existing responsibilities. Monitoring Such bodies should be encouraged to provide publicly bodies carry out accessible information to companies on ways to an essential role continually improve internal control and risk in benchmarking management and sharing good practice
  21. 21. Further details• Further detail on the FERMA and ECIIA Guidance Paper on monitoring the effectiveness of internal control, internal audit and risk management systems is provided on the FERMA website: http://www.ferma.eu/Portals/2/documents/press_re leases/20100921-eciia-ferma-guidance-on-the-8th- eu-company-law-directive.pdf
  22. 22. • FERMA presented their response to the European Commission by letter dated 22nd July 2011• ADD FERMA’s CONTACT DETAILS + Twitter etc.

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