Risk Management Committee in the Malaysian Code on Corporate Governance (MCCG) 2024

The 2024 update to the Malaysian Code on Corporate Governance (MCCG) highlights the importance of establishing a Risk Management Committee, primarily comprising independent directors, to oversee risk management. This article explores the significance of this update, supported by extensive research and practical implementation strategies.

Key Insights

• Enhanced Risk Oversight: A dedicated Risk Management Committee enhances the board's ability to oversee and manage risks effectively, ensuring that risk management practices are aligned with the company's strategic objectives.

• Independence in Risk Management: Having independent directors on the Risk Management Committee ensures objectivity and impartiality in assessing and addressing risks.

Research Findings

• Global Best Practices: The Committee of Sponsoring Organizations of the Treadway Commission (COSO) recommends establishing dedicated risk management committees as a best practice for effective risk oversight.

• Improved Risk Management: Research by PwC indicates that companies with dedicated risk management committees tend to have more robust risk management frameworks and better risk mitigation outcomes.

Implementation Strategies

• Committee Charter: Develop a comprehensive charter for the Risk Management Committee, outlining its roles, responsibilities, and authority.

• Independent Director Selection: Ensure that the committee is composed of independent directors with relevant risk management expertise.

• Regular Reviews: Conduct regular reviews of the company's risk management framework and the committee's performance to ensure continued effectiveness.

Conclusion The establishment of a Risk Management Committee, primarily comprising independent directors, as recommended in the MCCG 2024 update, is crucial for enhancing risk oversight and management. By implementing this practice, companies can ensure objective risk assessment, align risk management with strategic objectives, and strengthen their overall governance framework.