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Listed company query

Mohan Kumar (Company Secretary) (62 Points)

15 May 2009

Hi Friends,

What is the requirement as to Risk Management committee in a listed Company?

i) Should there be a separate committee required or only audit committee takes care of Risk management also?

ii) Who should be the members of the Risk management commitee? Independent Directors? Can some members of the Senior management team (who are not Directors of the Company) be a member of the committee?

iii) Is there any time limit for meetings of the committee? I-e Should the committee once in an year or once in every quarter?

A detailed response will be of great use.

Thanks in advance.

Kumar

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3 Replies

CS Mitesh Mehta (Company Secretary) (17139 Points)
Replied 15 May 2009

hi,

Answer for your queries.

As per Listing Agreement, there is no specific requirement for Risk Management Committee in Listed Companies.

For your ready reference, i am re-producing relevant Clause (Clause 49(IV)(C)) of the Listing Agreement.

49(IV)(C) Board Disclosures – Risk management

The company shall lay down procedures to inform Board members about the risk assessment and minimization procedures. These procedures shall be periodically reviewed to ensure that executive management controls risk through means of a properly defined framework.

Listing Agreement is silent on Formation of Risk Management Committee, Its Composition, No. of meetings, Quorum etc.

As per Listing Agreement, at Board Meeting company should lay down the procedure for Risk Management & periodically review the same.

Hope you query is resolved now.

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Ankur Garg (Company Secretary and Compliance Officer) (114773 Points)
Replied 15 May 2009

Dear Mohan,

Kindly appreciate clause 49(IV)(C) of listing agreement is talking about Risk Management without mentioning the requirement to constitute Risk management Committee.

On the basis of above interpretation there is only one answer to all your queries:

No need to form separate committee for risk management. Audit Committee’s terms of reference can very well takes care of Risk management policies also.

Preparation of procedure for risk assessment and minimization and adoption of the same in Audit Committee meeting would be sufficient compliance. Also apprise the board members regarding risk assessment and minimization procedures periodically in BM.

Best Regards