Corporate Governance Codes: Dialogue with Stakeholders and Risk Management
Effective Dialogue with Stakeholders
Importance of Stakeholder Engagement
A crucial aspect of corporate governance is the dialogue between a company and its relevant stakeholders on the sustainability aspects of its strategy. This section highlights the importance of maintaining effective communication channels.
Key Points for Dialogue with Stakeholders
- The management board should establish an outline policy for facilitating dialogue with relevant stakeholders.
- Companies must encourage stakeholder engagement, except when it’s not in their best interest or that of their affiliated enterprises.
- A published policy on the company website is essential for transparency.
Risk Management
Identifying and Mitigating Risks
Companies should have robust internal risk management systems to identify and manage risks associated with their strategy and activities. This includes considering various types of risks, such as:
Examples of Strategic, Operational, Compliance, and Reporting Risks:
- Climate change
- Social inequality
- Tax risks
- Fraud risks
- Money laundering risks
- Information and communication technology (ICT) risks
Best Practices for Risk Management
- Risk Assessment: The management board must identify and analyze the risks associated with the company’s strategy and activities.
- Implementation: Based on the risk assessment, the management board should design, implement, and maintain adequate internal risk management and control systems.
- Monitoring of Design and Operation: The management board should monitor the design and operation of the internal risk management and control systems and carry out a systematic assessment at least once a year.
Internal Audit Function
Oversight and Assurance
The internal audit function is responsible for assessing the effectiveness of the company’s internal risk management and control systems. This includes:
- Design and Operation Assessment: The internal audit function should evaluate whether the internal risk management and control systems are designed and operated effectively.
- Supervisory Board Oversight: The supervisory board maintains regular contact with the person fulfilling this function to ensure they receive updates on their work.
By implementing these best practices, companies can ensure that their internal governance processes are robust, transparent, and aligned with stakeholder expectations.