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Setting the 2010 Agenda, KPMG  -- February 27, 2010

Rethinking the Audit Committee’s Role in Risk Oversight
The tremendous focus on risk today, including the SEC’s new disclosure rules regarding the board’s role in risk oversight, is an opportunity for audit committees to reassess what their role - versus the role of the board and other standing committees – should be in the oversight of risk.  While there was general agreement that the full board should oversee the strategic risks facing the company, there was no consensus on the role of the audit committee.

Some directors see an expansive role for the audit committee involving both the oversight of the company’s risk management processes as well as key substantive areas of risk such as financial, operational, and regulatory/compliance risks.  Others said the expertise of other board members must be leveraged in these areas, and had a much more restrictive view of the role of the audit committee.

• “The audit committee exists to deal with one very significant enterprise-wide risk, and that’s the risk of either fraudulent or erroneous financial reporting.  That’s plenty.”
• “I don’t get into strategy during an audit committee meeting.  That’s a board-level issue…you need to keep these issues where you expertise lies.”

At the board level, while it’s clear that worst-case scenarios – “thinking the unthinkable” – are more often part of the risk discussion, directors are also emphasizing that risk management is not just about “playing defense.”

• “For a while now we’ve been reacting to outside forces.  We need to shift to offence, to determine what kinds of risk the company needs to take based on its strategic direction.”
• “Risk management systems and processes have not kept up with the change and the complexities of the business world.”

“We’re spending much more time thinking the unthinkable.”

Explore - Helpful Resources & Links

• National Association of Corporate Directors
• Directors & Boards
• Corporate Boardmember
• Risk Metrics
• Securities & Exchange Commission

Interact

1. Take the XCEO Diversity Survey to let us know how your board handles the issues of corporate, leadership and skill diversity on your board.

2. Our next Webinar… email info@xceo.net to provide ideas for XCEO’s next Webinar. The topics for consideration include:

• Succession Planning
• Board Risk Oversight
• Directors as the New CEO
• Board Diversity
• The Audit Committee as the Risk Committee

3. Who serves on a non-profit board? Our newest XCEO member is developing a program for Public Sector Governance that is unique and cutting-edge. To learn more about our new offerings, e-mail, dr.crawford@xceo.net.

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