Companies are engaging in a higher level of risk oversight, resulting in more board members and board-level committees in charge of overseeing risk, according to a study published by Deloitte.

Deloitte reviewed the 2011 proxy disclosure statements of the top 200 companies listed in the S&P 500 and found that the overall positive trend is for companies to maintain or increase their attention to practices regarding risk oversight and disclosure of those practices.

The consulting firm focused its analysis on the top 12 areas in companies' disclosures that are geared toward management's accountability on risk issues, ownership of responsibility in risk and oversight matters, corporate culture on risk management, and responsibilities of audit and board committees on risk and governance issues.

Among the key trends observed by the consulting firm include:

• More companies disclosed that other committees beyond just the audit committee are now involved in risk oversight (88 percent in 2011, 82 percent in 2010)
  
• Frequency of companies disclosing that the compensation committee is responsible for overseeing compensation plans' risk increased by six percent compared to 2010 (58 percent in 2011, 52 percent in 2010) 
  
• A six percent jump in the number of companies who disclosed whether risk oversight/management are aligned with company strategy  (45 percent in 2011, 39 percent in 2010)
  
• More companies disclosed how the board is involved with the company's risk appetite decisions (11 percent in 2011, 8 percent in 2010)

“These findings indicate a steady evolution of board risk oversight practices in major corporations over the past year,” Deloitte said. Deloitte said this evolution should lead to increased disclosure and improved practices.

Not surprisingly, Deloitte noted that the financial services industry is more developed than other industries in its risk oversight and management practices largely due to the nature of the financial service business and the regulatory burden imposed on those companies by the Dodd-Frank Act, the Basel Accords, and other regulatory developments.

The consulting firm also stressed the importance of telling the story of company risk oversight and management activities through disclosures in proxy statements. “Leaders should go beyond minimum requirements imposed by regulation and truly embrace risk governance and oversight,” it said.

In addition, the firm said board members and executives might want to consider the following steps to improve their governance disclosure practices, which include

• Revisiting your risk governance and oversight practices periodically
  
• Keeping the development of your practices on top of the agenda and ensuring sufficient funding to continuously improve your oversight practices
  
• Using competitors, peers, and market leaders' risk-related disclosures in proxy statements as benchmarks
  
• Ensuring that your disclosures tell the full story of your risk oversight efforts to stakeholders

http://www.complianceweek.com/companies-improve-level-of-risk-oversight-in-2011/article/211829/