Risk management and non-executive directors in UK quoted banks and other financial institutions

Abstract

This article analyses the risk management function in UK quoted banks and other financial institutions with specific reference to the role of non-executive directors and relevant committees of the board of directors. We discuss definitions of risk and uncertainty and refer to recommendations expressed in corporate governance codes concerning the role of risk management. We next discuss where in the firm the risk management function should be located and the extent to which this is a relevant function for non-executive directors. We conclude that risk management is not a legitimate function for non-executive directors, but should be the primary responsibility of the executive directors. Nevertheless, non-executives may have a minor role to play in risk assessment, evaluation and monitoring.