The Financial Reporting Council's latest guidance on the reporting of important risks has now been published. In a nutshell, boards are required to report 'principal risks' that have their origins in 'behaviour or organisation', what we call behavioural and organisational risks. This new recommendation effectively recognises our conclusion, that there is a hole in the 'Three Lines of Defence' doctrine that underlies most current risk analysis and reporting.
Behavioural and organisational risks are important causes of
reputational damage and of many better-recognised risks. However, boards
cannot properly report on 'principal risks' until they have
systematically identified and evaluated both the range of behavioural
and organisational risks at work in the company and the extent to which
they may give rise to principal risks including reputational hazard.
We have written about the practical implications for boards, chairmen and company secretaries, for Governance, the authoritative publication on international corporate governance.
You can find our article here.
Anthony Fitzsimmons
Reputability LLP
London
Anthony Fitzsimmons is Chairman of Reputability LLP and,
with the late Derek Atkins, author of “Rethinking Reputational Risk: How to Manage the Risks that can Ruin YourBusiness, Your Reputation and You”
