Approval of Financial Statements Shareholders Boards Audit Committee Bert Vos Russian Corporate Governance Roundtable Meeting November 2004

The Decision Pyramid Russian Corporate Governance Roundtable Meeting November 2004 Shareholders Board Audit Committee Management Other stakeholders

Lesser Transparency Shareholders Audit Committee Management Board Russian Corporate Governance Roundtable Meeting November 2004

The Challenge Russian Corporate Governance Roundtable Meeting November 2004 Management and Shareholders Audit Committee Board

Status Quo Best Practice - Basel II: Vision; necessity underlined by Herstatt, Metallgesellschaft, WorldCom, Enron, Ahold, etc. Assumes integrated Management Information Systems Willingness to share Information Practice: Transition Markets Systems Developing Legislators and Regulators struggling GIGO. Does the decision maker have sufficient reliable information? Russian Corporate Governance Roundtable Meeting November 2004

Approval of Financial Statements Knowledge of business, of risk appetite, and of competitor’s market position Assessment of Strategy Understanding of Accounting issues Availability of information Independence of Board Russian Corporate Governance Roundtable Meeting November 2004

Basis for Decision making: (Management) Board and senior management oversight; Sound capital assessment; Comprehensive assessment of risks; Monitoring and reporting; Internal control review; Compliance Control Adopted from Basel II recommendations: § Russian Corporate Governance Roundtable Meeting November 2004

EFFECTIVE SUPERVISION IS THE KEY Financial Stability Institute (FSI)

Enforcement and Training Re: Recommendation 9, 15-20, 25 Supervisors have different powers available to them to achieve disclosure requirements Regulators Returns definition should make Returns authoritative information supporting decision on accounting issues. Boards should get trained (risk assessment, implications of guidelines) Russian Corporate Governance Roundtable Meeting November 2004

Comfort to make Decision Re: Recommendation 24 Standardisation of Management Reports Implement consistent Risk Management Reporting Reasonableness Check of Management Accounts Access to Additional Information, Accounts and Staff Functioning Internal Control And, to cross verify: Less Returns but with better Information Russian Corporate Governance Roundtable Meeting November 2004