Insight

Aligning and coordinating AC oversight activities with the board and other committees

The ​AC chair plays an important role in ensuring that the risk oversight activities of the board and all committees are properly coordinated with the AC.

In recent years, we have seen a number of changes in how boards—through their committee structure—oversee risk. One major change is a general recognition that risk oversight is a responsibility of the full board—not the responsibility of any single committee, such as the AC. A second change we see is the emphasis on ensuring that risk oversight responsibilities and activities are appropriately allocated and well-coordinated among the board’s committees—and reducing some of the burden on the AC. That might call for an additional board committee(s), such as a technology, finance, compliance, or (for banks) risk committee. To balance the workload, we see boards assigning specific risks to these committees (e.g., cyber risk to the technology committee), and we also see boards reassigning risks among their three mandatory committees.

As a result, AC chairs are playing an increasingly important role in ensuring that the risk oversight activities of the board and other board committees are properly coordinated with the AC, and that the AC has the necessary skill sets.

AC chairs work with lead directors and nominating/governance committee chairs to ensure that:

  • The risk oversight responsibilities of the full board and its committees are clear.
  • There are proper communications about risk among board and standing committees.
  • Risk oversight processes are keeping pace with the increasingly volatile and disruptive business and risk environment.

Possible approaches to improve coordination and reduce the risk of a balkanized board/committee structure include:

  • Overlapping committee memberships: many AC chairs recommend that at least one member of the AC serve on the compensation committee and other key committees (e.g., finance, risk, and compliance)
  • More robust committee reports to the full board
  • Education for all board members regarding the financially sensitive risks that the various committees may oversee

Explore all topics in the Role of the Audit Committee Chair report


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