Understanding the business and its inherent risks
Understanding the business and its inherent risks

Understanding the business and its inherent risks

One of the AC chair's key roles is to help ensure that committee members understand the top critical risks to the business.

A key role for the AC chair is to ensure that all committee members understand the critical risks to the business—risks to its strategy, its business model, or its survival.

To that end, many AC chairs:

  • Emphasize the importance of spending informal time with key people in finance, risk management, internal audit, and external audit
  • Encourage their committees to get out and “kick the tires”—visiting company locations, meeting local management and employees, as well as members of the local external audit team. The goal is to obtain a better understanding of the issues facing the business, including the problems and concerns of various managers throughout the business, as well as the tone and culture of the organization
  • Meet with leaders of the various lines of business in an effort to understand their strategies and the risks to these strategies
  • Insist that their committees be kept apprised of regulatory/compliance issues that are ongoing.

In light of the #MeToo movement, many AC chairs are taking deeper dives into culture and behavioral risks. To that end, ACs are probing HR for cultural and behavioral data (employee surveys, turnover rates, and exits exit interviews, etc.) beyond what has historically been provided regarding ethics, compliance, and whistleblower hotline complaints.

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

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