1. Audit / Risk Committee effectiveness
Optimising the role of the Chair and iNEDs
April 2017

2. Overview
Effective Audit Committees and Risk Committees operate as high performing teams

3. Ineffective team
England fail to make it out of the group stages in the Rugby Union World Cup

4. Effective team
England win the Six Nations and a Grand Slam

5. Key attributes of a high performing team
Clear vision
Inspiring leader
Focussed discipline
Working
together

6. Clear vision … clearly defined role and remit
Risk Committee (RC)
Audit Committee (AC)
Financial reporting
External audit
Internal audit
Other assurance
Whistleblowing
Effectiveness of risk management framework
Policy framework
Issue / event management
Internal control effectiveness
Change management
Risk strategy (appetite and culture)
Risk identification, assessment and mitigation / management
Risk management framework design
Where there is overlap….
Consistent MI?
Aligned view on risks and priorities?
Duplication?

7. Inspiring leader …The role of the AC / RC Chair
Significant functions
Practical implications
AC Chair (SIMF11):
Responsibility for chairing and overseeing the performance of any committee responsible for the oversight of the internal audit function …
Conducting and evidencing effective Chairmanship
Evidential and proactive support for and management of Head of Internal Audit
RC Chair (SIMF10):
Responsibility for chairing and overseeing the performance of any committee responsible for the oversight of the risk management system …
Conducting and evidencing effective Chairmanship
Evidential and proactive support for and sponsorship of Chief Risk Officer

8. Inspiring leader … Focusing on what matters
Setting and assessing culture
FRC July 2016 – Corporate culture and the role of Boards
Clear articulation of values; processes drive desired culture; airtime at AC / RC
Sponsorship of Chief Risk Officer & Head of Internal Audit
Consultation to CIIA Guidance to IA in financial services
Good AC Chair/ HIA engagement; evaluation of IA effectiveness against CIIA Guidance
Plans and preparation for external audit rotation with tendering firms (reduction of non-audit services)
External audit responsibilities
EU Audit Directive
Defined approach to performance reviews; culture for continual improvement
Committee effectiveness
Senior Insurance Manager Regime
AC / RC oversight of Change and mapping of skills / expertise needed for future business model
Dynamic business models
Technology trends and pace of change

9. Focussed discipline … Committee effectiveness
Committee attributes the Chair should drive and sponsor
Governance and composition
Remit and coverage
Effective meetings
Management information
Clear position in governance & effective interaction with other Committees
Independent and thoughtful challenge
Clear and complete Terms of Reference (ToR)
Complete coverage of ToR with appropriate frequency and depth
Prioritisation and focus at meetings
Meeting frequency, timing and length
Relevant, reliable, timely
Focussed, succinct and digestible

10. Working together … Committee effectiveness
Committee attributes the Chair should drive and sponsor
Governance and composition
Remit and coverage
Effective meetings
Management information
Composition – mix of skills and experiences (financial reporting)
Rotation, succession, induction, training
Aligning AC/ RC coverage against Board strategic priorities and key risks at Board level
Harnessing technical expertise to an appropriate level
Balanced contribution and good attendance from members
Good executive management attendance and engagement
Proper preparation and time outside of formal meetings
MI needs discussed and clearly defined
Clearly stated purpose (for approval, noting, discussion, decision)
Pre-meeting review/ discussion on papers

11. Summary – questions to consider
Does AC / RC activity fully discharge Committee’s remit and appropriately align to strategic priorities and key risks?
Annual plan on Committee meeting coverage against ToR; alignment is clear from AC / RC Chair’s Report to Board
How effectively is culture defined and assessed?
AC / RC dedicates airtime to discussing culture and ‘cultural’ root causes analysis
Does the AC / RC assess its own effectiveness?
Formal and informal assessment (eg 5 minute debrief at end of each AC / RC)
Does the AC / RC take the time to ‘join the dots’ to assess the big picture?
Reporting/ discussion on holistic views on governance, risk management framework, culture, root cause / themes and trends
Is MI fit for purpose?
AC / RC has defined its MI needs, format and frequency

12. Summary – questions to consider
Does AC / RC Chair champion the cause of the CRO / Head of IA?
Reporting lines and effective mentorship by AC / RC Chair
Does the AC / RC Chair effectively monitor the match fitness of the Committee?
Future business plans linked to Committee composition, expertise and training
Is there appropriate planning for the EU Audit Directive?
Audit rotation rules formally assessed and succession plans in place
Are the AC and RC effectively co-ordinated?
AC and RC Chairs in frequent dialogue outside of formal Committees; aligned view of key risks and priorities
In a combined AC / RC (ARC), is the balance right between risk management and assurance?
ARC agenda allocates time appropriately and MI/ ‘airtime’ is appropriately balanced between risk and assurance