Risk Management Policy Role of directors

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Risk Management Policy Role of directors

Date \| Version	September 19, 2022 \| 1.0
Keywords	Risk, Risk Management, Risk Management Policy, Board Report
List of Legislation Referred	Companies Act, 2013 SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015
Jurisdiction	India

Abstract

This write-up examines the statutory requirement of having a risk management framework under the companies legislation in India, the objectives of a risk management policy, and the role of directors in implementing and monitoring such framework.

Introduction

Risk is unavoidable and forms an integral part of every business. The need for careful identification, assessment, mitigation and management of risks cannot be overstated, as unmanaged risks may significantly impact shareholder value, business continuity, liquidity and even the solvency of a company.

With increasing business complexity, rapid technological advancements and evolving market conditions, organisations are required to establish a robust risk management framework supported by a comprehensive risk management policy.

The article examines the regulatory requirements under the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, discusses key categories of business risks, and outlines the role of directors and risk management committees in developing effective risk management policies.

It further highlights the objectives of a risk management policy, including risk identification, assessment, mitigation, regulatory compliance and sustainable business growth with financial stability.

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