Principle 7: Recognise and Manage Risk Guide for small – mid market capitalised companies

ASX Markets Supervision (ASXMS) has sponsored the development of this Guide to Reporting on Risk for the purposes of ASX Listing Rule 4.10.3 and, hence, Principle 7 of the ASX Corporate Governance Council Corporate Governance Principles and Recommendations (“Principles”).

Risk management is an element of corporate governance which is under increased focus – a focus which was rising in any event and has been elevated further since the global financial crisis.  The Principles identify risk management practices which listed entities must report against in their annual reports on an “if not, why not” basis.  Accordingly, while the Principles do not mandate these practices, it is for listed entities to disclose and explain the extent to which they have not followed the Recommendations set out in the Principles, and give reasons for not following them if that is the case.

ASX has identified that small to mid-capitalised ASX-listed entities may experience difficulty in implementing risk management practices which accord with the recommendations in the Principles due to the generally lower level of resources available to such entities.  The purpose of this Guide is to allow small to mid-capitalised ASX-listed entities to access information and guidance on the management of material business risks in a way that will allow them to report positively against the recommendations in Principle 7.

The ASX Listing Rules require a listed entity to report in its annual report on the extent to which it has followed the Principles during the reporting period.   Many listed entities may find themselves in a position of having commenced a review of how they manage risk and whether it accords with the recommendations in the Principles towards the end of a particular reporting period.  ASXMS encourages such entities to identify that they have commenced this process so that their stakeholders will be aware that this is the case.

ASXMS would like to thank our partners in the production of this Guide - Deloitte and Blakiston & Crabb.  Together they have assisted ASXMS in identifying the need and delivering a solution.  The production of this Guide in June 2009 will be accompanied by a series of national seminars to introduce the Guide and explain how best to use it.  These will be followed, where the demand exists, by workshops to answer more detailed questions from entities which have commenced the process of managing their material business risks in accordance with the recommendations in Principle 7 and with the assistance of this Guide.

This program is made possible by the ASX Markets Supervision Education and Research Program.  The Program uses the proceeds of fines and settlements from ASX’s Disciplinary Tribunals (less certain expenses in taking matters before the Tribunals), to raise awareness of and promote compliance with ASX’s supervisory requirements and supervisory issues in ASX's markets and promote the integrity of ASX’s markets and/or promote confidence in their integrity.

Materials:

Guide to Reporting on Risk (PDF 646KB)

A copy of the power point presentations used in the seminars are available here:
ASX (PDF 110KB)
Deloitte and Blakiston & Crabb (PDF 508KB)

Audio of the Perth Principle 7 Seminar held on the 16  June 2009 is also available:
Principle 7 - Perth Seminar webcast