Corporate Governance Roles and Responsibilities Flashcards

These flashcards define key terms and concepts related to corporate governance, board responsibilities, and enterprise risk management roles as described in Chapter 2 of the Marchetti book.

Corporate governance

A vital component of risk management that provides top-down monitoring and management of risk associated with an organization.

Enterprise risk management (ERM)

A comprehensive program whose implementation requires understanding the relationship between corporate governance and risk management roles and responsibilities.

Commission Governance

A commission created by the New York Stock Exchange in $2008$ to address issues impacting corporate governance following the financial crisis and corporate scandals like Enron.

Fiduciary responsibility

The accountability and responsibility the board of directors has to the organization and its shareholders or owners.

Board Independence

A critical quality for board directors to ensure objectivity and that each member acts in the best interest of the organization and its stakeholders.

Tone at the top

The ethical environment and risk management expectations established by the board and management to guide the entire organization.

Code of ethics

A document approved and reviewed annually by the board that reinforces standards for ethical behavior, integrity, and guiding principles for all employees.

Whistleblower program

A program that, alongside the code of ethics, facilitates good corporate governance and strengthens entity-level financial control.

Chief Executive Officer (CEO)

The individual with ultimate overall responsibility for ERM, ensuring the development and implementation of all required components of the risk management program.

Risk Officer

An individual responsible for establishing ERM policies, framing authority for ERM in business units, and establishing a common risk management language.

Internal Audit

A function that strengthens risk management by auditing the risk management process, identified risk areas, and supporting management with risk identification strategies.

Risk appetite

The level or type of risk an entity is willing to accept, which the board must be aware of and concur with.

Portfolio view of risk

A composite perspective of the entity's risks that the board reviews against the organization's risk appetite.

Risk Management Policy

A published document that outlines the organization's risk management philosophy, approach to risk, and its risk appetite.

Common risk management language

Standardized terminology established by the risk officer that includes measures for likelihood and impact and common risk categories.

Risk governance

A process closely associated with value creation that provides necessary top-down monitoring for an effective risk management perspective.