OSFI updates Corporate Governance Guidelines with proposals around risk management

Canada’s solvency regulator, the Office of the Superintendent of Financial Institutions (OSFI), is seeking comment on its Draft Revisions to the Corporate Governance Guideline, which, among other things, emphasizes the commitment of the organization to risk management principles.

The draft revisions update OSFI’s current corporate governance principles, which have not been changed 2003. The 20-page draft guidelines contain a section that includes a number of recommendations concerning the recognition of risk management principles by boards of directors. The risk management proposals include:

• The organization’s board of directors should periodically commission independent third-party reviews to assess the federally regulated financial institution (FRFI)’s risk management systems and practices.

• An FRFI should have a board-approved Risk Appetite Framework (RAF) that guides the amount of risk the FRFI is willing to accept in pursuit of its strategic and business executives.

• Depending on the nature, size, complexity and risk profile of the FRFI, the board should establish a dedicated Board Risk Committee to oversee risk management on an enterprise-wide basis.

• FRFIs should have a designated Chief Risk Officer (CRO) who “should have sufficient stature and authority within the organization, and be independent from operational management.” The CRO would have access to the board and risk committee “without impediment, including a direct reporting line to the board or risk committee.”

OSFI is looking for interested parties to submit their comments on the proposed guidelines by Sept. 14. The full draft of Corporate Governance Guideline can be found at:

http://www.osfi-bsif.gc.ca/app/DocRepository/1/eng/guidelines/sound/guidelines/CG_FRFI_dft_e.pdf