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13 Questions on Risk Management
Has the board approved these policies?
Because the board is responsible for establishing the risk culture of the firm, it must approve major policies regarding financial instruments. In the process of carrying out this approval properly, members of the board will gain some familiarity with various financial instruments (including derivatives), the risks of such exposures and their impact on the firm under varying scenarios. These major policies must be reviewed regularly and when market or business circumstances change.
Board approval for these policies must be more than simply rubber-stamping. Board members must realise that signing off on these guidelines means that they will also be held accountable if major disasters in the use of financial instruments occur.
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