SEC mandates More Intense Risk Management

Directors of public firms must give greater scrutiny to their risk exposure and must tell shareholders how they are mitigating those risks. Late last month, the Securities and Exchange Commission (SEC) adopted rule 407(h) that requires corporate boards to explain their risk management and oversight responsibilities in their company The disclosure must detail both the board’s structure and strategy for carrying out ERM processes, and it must be included in the company’s proxy statement. Experts suggest that the new rule will transform firms by urging them to incorporate the ERM process at every level of the organization and infuse it into their culture.