The Hampel committee report on corporate governance came under fire this week for allowing senior management to consign the assessment of risks in their business to a ‘box-ticking exercise’ at the year-end.
Ernst & Young said while the report recommended boards should maintain a ‘sound’ system of checking risks to the business, the decision to report its findings under the banner of internal controls could undermine efforts to make risk assessment a broader activity.
Alli Macaskill, a partner in the firm’s business risk consulting practice, said the report is potentially dangerous if managers think the issue is something they should only think about at the year-end or the end of each quarter.
‘The need to report in the context of internal controls may be interpreted as a relatively hollow exhortation that lulls organisations into the very types of box-ticking exercises that the Hampel committee deplored,’ he said.
Macaskill argued this kind of risk assessment can easily be seen as a burden that is absorbed, and probably resented, by the people in the business.
His views echoed the criticisms lodged by the Institute of Internal Auditors, which said boards would fail to prevent fraud unless an anti-fraud culture was embedded in their organisations rather than simply asking a set of questions.
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