Corporate Governance 2024 Comparisons

According to the Companies and Allied Matters Act 2020 (CAMA), the principal forms of corporate/business organisation in Nigeria comprise the following:

• private company limited by shares ‒ a private company limited by shares is a corporate entity separate from its owner or owners with perpetual succession, a common seal and the capacity to sue and be sued in its own name;
• public company limited by shares – a public company limited by shares also has a separate legal personality from its owners, although there is no restriction on the number of shareholders a public company can have;
• company limited by guarantee – a company limited by guarantee is form of company specifically incorporated to promote a particular subject such as commerce, art, science, religion, sports, culture, education, research, charity, or other similar objects; and
• company unlimited by shares – an unlimited liability company in Nigeria is the one where its members’ financial liability in the event of it being wound up has no limit.

The principal sources of corporate governance requirements for companies in Nigeria include:

• CAMA;
• the Nigerian Code of Corporate Governance 2018 (NCCG) issued pursuant to the Financial Reporting Council of Nigeria Act 2011; and
• the Code of Corporate Governance for Public Companies in Nigeria 2011 issued by the Securities and Exchange Commission (SEC).

Companies with publicly traded shares are subject to the following requirements.

• Board composition – the board composition of a company with shares that are publicly traded should comprise no less than seven members.
• Number of committees – according to the NCCG, companies with publicly traded shares are expected to have three committees (ie, an audit committee, a nomination and governance committee, and a risk management committee).
• General meeting – a company with publicly quoted shares is mandated to hold a general meeting each year, in addition to any other meeting.
• Policies and governance document – publicly quoted companies are required to have policies to guide the operation of the company in line with global best practice. Some of the policies kept by publicly quoted companies are a succession policy, a diversity policy, a code of ethics, a whistle-blowing policy, and a conflict of interest policy.

Corporate governance plays a critical role in today’s corporate landscape, particularly in the formulation of succession policies within companies. Regulators now closely oversee the decision-making processes related to role transitions (see Section 11.2 of the NCCG).

A hot topic when it comes to corporate governance is the management of corporate finances. This constitutes a significant aspect of corporate governance, with public companies obligated to regularly disclose financial statements to uphold financial accountability.

Another emerging area of focus is the integration of ESG principles into corporate governance practices. This reflects a growing commitment among companies to address ESG concerns.

The key requirements for companies in relation to reporting on ESG issues are as follows.

• Standards and frameworks – ESG reporting requires companies to adopt various standards and frameworks. Some ESG reporting standards and frameworks exist, such as the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), and the Task Force on Climate-related Financial Disclosures (TCFD). Each framework outlines its specific guidelines for reporting on ESG factors.
• Materiality assessment – companies are expected to identify and prioritise ESG issues that are crucial to their business and stakeholders by conducting a materiality assessment.
• Due diligence – companies opt for third-party verification or assurance of their ESG disclosures to enhance credibility and reliability. Independent assurance can provide assurance to stakeholders about the accuracy and completeness of reported information.
• Data collection and management – a formalised ESG data collection process provides a framework for structured data collection, aggregation, analysis and cleaning, which in turn enables accurate ESG reporting.
• Stakeholder engagement – this involves engaging with stakeholders to understand their expectations, concerns, and priorities. Companies should communicate openly with investors, customers, employees, and communities to gather feedback and address any issues raised.
• Integration into corporate strategy – ESG considerations should be integrated into the company’s overall corporate strategy, risk management processes, and decision-making frameworks.

The principal bodies and functions involved in the governance and management of a company are as follows.

• Board of directors – the board of directors serves as the governing body of a company, whereby its members set strategy for the effective management of the company and also protect the interests of shareholders and stakeholders in the company.
• Executive management – the executive management is involved in the day-to-day administration of the company by ensuring compliance with regulatory bodies and implementation of board strategic policies.
• Statutory and board committees – statutory and board committees assist the board in gaining traction in achieving its aims and objectives, in addition to making recommendations to the board.
• Internal auditors – the internal auditors identify issues such as compliance concerns, risk, fraud and data inaccuracies.
• External auditor – the key responsibility of the external auditor is to exert independent judgment on the company’s financial statement.
• Company secretary – the company secretary essentially provides administrative support to the executive management as well as compliance support to the company.
• Regulators and government agencies – regulators and government agencies oversee the external regulation of a company by ensuring that companies comply with corporate governance guidelines.

The principal decision-making body in a corporate entity is the board of directors. However, certain types of decisions are typically made by particular bodies, as follows.

• The board of directors – the board of directors is the core decision-making body of any company and its decisions concern the strategy development and implementation, risk management and internal control, transparency and disclosure, corporate citizenship and sustainability, performance management and remuneration, board structure and composition, and general management of the company.
• Executive management – the executive management is responsible for the day-to-day administration of the company and its decision-making powers are subject to the authority delegated by the board of directors.
• Statutory and board committees – statutory and board committees deliberate on technical matters assigned in their respective terms of reference and proceed to make recommendations to the board.
• Shareholders – shareholders being the owners of the company have specific matters that are exclusively within their purview, such as increase in share capital and the appointment of directors and external auditors. A company’s articles of association may also reserve specific matters to shareholders.
• Regulators and government agencies – regulators have external influence on the management and governance of companies. They exact this influence by implementing the laws regulating the companies and issuing circulars/guidelines to companies from time to time.

The processes by which each body makes decisions are as follows.

• Board of directors – board decisions are typically passed by a resolution at board meetings following extensive discussion of the subject matter. The procedure for voting is typically stated in the company’s articles of association and is mostly by simple majority. In the event that a company is unable to convene a board meeting or depending on the urgency of the matter, a written resolution signed electronically by all directors will be passed.
• Shareholders – decisions of shareholders are passed at the general meeting of the company. The voting procedure is also provided in the articles of association and would sometimes depend on the subject matter. In some companies, decision-making rights are dependent on the number of shares held, whereas in others companies all shares hold the same voting rights.
• Executive management – the executive management is the fulcrum through which the strategic decision of the board is reached. However, in implementing the decision(s) of the board, the executive management will have to make decision within the terms of delegation.

CAMA and the NCCG provide for a single-structure board of directors. The board of directors comprises executive directors, non-executive directors and independent non-executive directors. Under CAMA, a company is required to have no fewer than two directors ‒ except for small companies, which are permitted to have one director under the single-member company structure. CAMA further qualifies a small company as a company with a turnover of less than NGN120 million and total assets of less than NGN60 million.

For public companies, the Business Facilitation Act 2023 pegs the number of independent non-executive directors at one-third of the total board composition. The board of directors has committees with distinct functions and with reporting lines to the board. The key committees recognised by CAMA and the NCCG are the nomination committee, the risk management committee, and the audit committee. CAMA provides that every committee is required to have statutory audit committee (SAC) composed of two directors and three shareholders’ representatives.

The roles of board members are typically outlined in the company’s board charter. An overview of the roles and responsibilities are as follows.

• Board chair ‒ the chair provides leadership to the board and is responsible for ensuring cohesiveness on the board so as to support management in achieving corporate success. Under the NCCG, the board chair should not be a member of any board committee.
• Non-executive directors ‒ the non-executive directors oversee, constructively challenge and hold to account management in their implementation of strategy within the group’s system of governance and the risk appetite set by the board.
• Independent non-executive director ‒ statutorily, the independent non-executive director should form one-third of the total board composition in public companies, whereas private companies are encouraged to have at least one independent non-executive director. The independent non-executive director has no substantial interest in the company and is expected to be a strong independent voice bringing a high degree of objectivity to the board in order to sustain transparency and impartiality.
• Executive management ‒ the composition of executive directors depends on the organogram of the company but would typically include the CEO, chief financial officer, chief operating officer and head of legal/company secretary. The executive directors are responsible for the implementation and achievement of the company’s strategic objectives.

CAMA and the NCCG help streamline the composition requirements for a company’s board of directors.

According to CAMA, the minimum number of directors expected for every company (apart from small companies) is two, with no maximum number. The articles of association of such a company may fix a maximum number of directors; however, any company whose number of directors falls below two must ‒ within one month of it so falling – appoint new directors. Such company is prohibited from carrying on business after the one-month period has expired, unless such new directors are duly appointed. CAMA further mandates public companies to have at least three independent directors on their boards to bring a high degree of objectivity to the board and to sustain stakeholder trust and confidence.

The NCCG, which aims to build and strengthen corporate transparency, accountability, credibility, integrity and trust, dictates that the effective discharge of the responsibilities of the board of a company and its committees is assured by an appropriate balance of skills and diversity (including experience and gender) without compromising competence, independence and integrity. As such, it provided for further requirements for the composition of a company’s board of directors.

The NCCG recommends that any company’s board should be of sufficient size to effectively undertake and fulfil its business and should assume responsibility for its composition by setting the direction and approving the processes for it to attain the appropriate balance of knowledge, skills, experience, diversity and independence to objectively and effectively discharge its governance role and responsibilities.

Some of the factors required by the board to consider in determining the requisite number of its members include:

• an appropriate mix of knowledge, skills, and experience, including the business, commercial, and industry experience needed to govern the company;
• an appropriate mix of executive, non-executive and independent non-executive members such that majority of the board are non-executive directors with majority of the non-executive directors being independent non-executives;
• a sufficient number of members that qualify to serve on the committees of the board and to secure quorum at meetings;
• diversity in the composition of the board so as to promote inclusion in its membership of a variety of attributes relevant for promoting better decision-making and effective governance – some of the attributes include the field of knowledge, skills, experience, culture, and gender.

Further to the recommendation of the NCCG and provisions of CAMA on the requirement for the composition of the board of a company, the positions of the chair of the board and the managing director(MD)/CEO of the company should always be separate such that no person can combine the two positions.

To avoid conflict of interest, breach of confidentiality, diversion of corporate opportunity, and divulgence of corporate information, it is recommended that in the composition of the board, a company is prohibited from having other members of the boards of competing companies as its board members. The chair of the board is also prohibited from serving as chair or member of any board committee, while the MD/CEO or an executive director should not serve as chair of any board committee either.

The first directors of a company are appointed at incorporation by the promoters of the company, while subsequent appointment is by ordinary resolution of shareholder at the general meeting. However, where there is a casual vacancy arising from the death, retirement, resignation or removal of a director, the board of directors may appoint a new director to fill the vacancy and present such appointment to shareholders at the next general meeting for ratification.

The following persons are disqualified from being directors under the Nigerian law:

• a child (ie, a person under the age of 18 years);
• a lunatic or person of unsound mind;
• a person suspended or removed;
• a person disqualified owing to insolvency, fraudulent activities, bankruptcy, or unsound mind; and
• a corporation other than its representative appointed to the board for a given term.

Apart from where otherwise provided in the company’s articles of association, at the first annual general meeting (AGM) of the company all the directors are to retire from office and at the AGM in every subsequent year one-third of the directors ‒ or, if their number is not three or a multiple of three, then the number nearest one-third – shall retire from office. The directors to retire in every year are those who have been longest in office since their last election; however, between persons who became directors on the same day, those to retire are (unless they agree among themselves) determined by lot. Directors retiring by rotation can be re-appointed by shareholders.

The process and criteria for appointment and removal of directors would typically be contained in the board charter or policy on board appointment with oversight delegated to the committee responsible for governance and nominations.

Unless provided in the articles of association or board charter, the removal of a director is a statutory process and thus the provisions of CAMA would be applicable as follows.

• The person(s) wishing to remove the director will issue a notice of the resolution to the company at least 28 days before the date of the meeting.
• Upon receiving the notice, the company secretary will:
1. send a copy to the director sought to be removed; and
2. issue notice of the meeting at least 21 days before the meeting date, along with any representations made by the director.
• At the meeting, the director sought to be removed will be allowed to present their case and read their representations to the members if they were received late or not received at all due to the company’s fault.
• Following the representation by the director, the company shall now pass an ordinary resolution to remove the director and authorise the secretary to file Form CAC 7A – Notice of vacation of office/removal of director within 14 days of removal with the Corporate Affairs Commission (CAC).
• Record the removal in the register of directors and the register of directors’ residential addresses and, if necessary, amend the register of directors’ shareholding.

CAMA and the NCCG have set rules to ensure independence of directors. The Business Facilitation Act stipulates that one-third of the board composition should be independent non-executive directors. The NCCG provides that an independent non-executive director must not possess a shareholding in the company the value of which is material to them such as will impair their independence or in excess of 0.01% of the paid-up capital of the company. Although Section 275(1) of CAMA sets a threshold of not more than 30% equity holding in the company to determine the independence of an independent non-executive director of a public company, companies typically apply the provision of the NCCG in setting the criterion of independence for their independent non-executive directors.

Directors are expected to disclose any form of conflict of interest or potential conflict of interest in the company they serve as director, as recommended by the NCCG. Conflicts of interest include insider dealing, personal interest in transactions with the company, and familiar relationships.

The duties of the directors of a company somehow extend to the officers of the company and are statutorily laced. These duties include:

• a duty to always act in what the director believes to be in the best interests of the company, in good faith, to preserve the company’s assets, further its business, and promote the purposes of the company.
• a duty to further the company’s business and purposes in a faithful, diligent and careful manner – in doing so, the director must pay attention to what an ordinarily skilful director would do in those circumstances and must also have regard to the impact of the company’s operations on the environment;
• a duty to always take into consideration the interests of the company’s employees, as well as the interests of its members;
• the duty of a director to exercise powers as a director based on the specified obligations within their role and not do so for a collateral purpose;
• a duty not to fetter discretion to vote in a particular way (the director is expected to use their voting power and discretion in the best interest of the company);
• where a director is allowed to delegate powers under any provision of CAMA, such a director must not delegate the power in a way that may amount to an abdication of duty;
• a duty to ensure that the director’s interest does not conflict with any of the director’s duties to the company; and
• a duty not to make unnecessary secret profit while managing and utilising the properties of the company as a director ‒ if such profit is made, the director is expected to account for it.

The directors’ statutory duties as set out in CAMA are in the interest of the company. Essentially, these duties are fiduciary in nature, meaning they must act in good faith and in the best interests of the company. Directors are expected to exercise their powers for a proper purpose and with care, skill and diligence.

As a general rule, a company ‒ rather than its shareholders ‒ can bring a claim against one of its directors for breach of duty, given that the duty is owed by the directors to the company itself. The options available to the company include order of injunction, compensation for damages, and revocation of contract. However, there are instances that entitle a shareholder to enforce a breach of director’s duties and they include:

• entering into illegal or ultra vires transactions;
• purporting to do by ordinary resolution any act that is required by CAMA or the company’s articles/charter to be done by special resolution;
• any act or omission affecting the shareholder’s individual rights as a member of the company;
• committing fraud on either the company or its minority shareholders;
• where a company meeting cannot be called in time to be of practical use in redressing a wrong done to the company or to its minority shareholders; and
• where the directors are likely to derive a profit or benefit ‒ or have profited ‒ from their negligence or from their breach of duty.         

Other bases for claims or enforcement against directors or officers for breaches of corporate governance requirements in Nigeria are as follows.

• Statutory regulations – Nigerian companies are subject to various statutory regulations and regulatory bodies, such as the SEC and the CAC. Directors and officers must comply with these regulations and failure to do so can result in enforcement actions.
• Common law – directors can be held liable under common law principles for actions such as negligence, breach of duty of care, or breach of trust.
• Shareholder actions – shareholders in Nigerian companies have the right to bring actions against directors for breaches of duty or other misconduct through derivative actions or direct claims.
• Criminal offences – directors and officers can also face criminal liability for offences such as fraud, insider trading, or other financial crimes under Nigerian criminal law.
• Tort law – directors can be sued under tort law for actions such as defamation, negligence, or misrepresentation.
• Regulatory enforcement – regulatory bodies such as the Nigerian Stock Exchange (NGX) or the Financial Reporting Council of Nigeria (FRCN) have powers to enforce compliance with corporate governance standards and can take enforcement actions against directors and officers for non-compliance.

The board oversees the remuneration of directors and the company through the committee responsible for nomination, governance and remuneration. The components of non-executive directors’ remuneration would usually include sitting allowance and directors’ fees, which are expected to be presented to shareholders for approval and disclosed in the annual report. Under the NCCG, non-executive directors are prohibited from receiving performance-based compensation.

The remuneration of executive directors would in most companies include annual salary, healthcare, car, housing, travel, telephone allowance, etc, and other performance-based compensation, which would be subject to board approval and disclosed to shareholders. Executive directors are not entitled to receiving sitting allowances and directors’ fees.

The NCCG recommends that the board develops a claw-back policy to recover excess or undeserved rewards (eg, bonuses, incentives, share of profits, stock options, or any performance-based reward) from directors and senior employees.

Failure to comply with the approval process would render the activities of the board void.

Under the NCCG, a company’s remuneration policy as well as the remunerations of all directors are required to be disclosed in the company’s annual report. Companies are also advised to implement a claw-back policy to recover excess or undeserved rewards (eg, bonuses, incentives, share of profits, stock options, or any performance-based reward) from directors and senior employees. The remunerations of directors are required to be presented to shareholders for approval, while the remunerations of the senior managers of the company must also be disclosed.

A shareholder’s relationship with the company in which they hold shares is a contractual one. The relationship between the shareholders and the company is guided by the memorandum and articles of association to the same extent as if they were covenants on the part of the company and each member must observe the provisions.

The shares held by the members give a right of participation in the company on the terms of the articles of association. A shareholder does not have a proprietary interest in the underlying assets of a company; however, they are entitled in proportion to their respective shareholdings to a share of the distributed profits of the company and, on a winding-up, to the surplus assets of the company after the company’s creditors have been repaid in full.

Shareholders are not liable for the acts of the company, except in very limited circumstances when the corporate veil can be pierced, where a company’s limited liability status is set aside, and a shareholder is liable for the company’s acts.

Typically, in a corporate structure, shareholders are not involved in the day-to-day management of the company. This responsibility is reserved for the board of directors as stipulated under the law and in the articles of association. However, there are certain matters that are reserved for shareholders’ approval, which include (but are not limited to) the following:

• amendment of the memorandum and articles of association of the company;
• appointment of a director;
• declaring a final dividend;
• increasing and reducing the share capital of the company;
• re-appointing a statutory auditor; and
• winding up the company by way of voluntary liquidation.

Shareholder decisions can be made by written resolution or at general meetings, where shareholders discuss the company’s performance and vote on relevant resolutions. There are two types of general meetings:

• annual (AGM), which are held once a year; and
• extraordinary (EGM), which take place when required.

Unless the company’s constitution provides otherwise, it is possible for a shareholder to appoint a proxy to attend and vote in their place when they are unable to attend a general meeting.

CAMA and the NCCG stipulate that a company must hold an AGM every year, ensuring that not more than 15 months elapse between consecutive general meetings. Exceptions to this rule include single-member companies and small companies, unless expressly stated in the articles of association. Notice of the AGM must be provided at least 21 clear days in advance, unless all who are entitled to attend and vote consent to a shorter notice period. Although the articles of association can extend the notice period, it cannot shorten the notice period. The Business Facilitation Act has introduced the option for virtual or electronic shareholder meetings for public companies.

As a general rule, only a company can bring a claim against any form of breach committed by its directors. However, as highlighted earlier, the law makes available options for shareholders to explore when bringing a claim on behalf of the company against a negligence of a director. The basis of claim for shareholders against the company or directors are:

• entering into any transaction which is illegal or ultra vires;
• fraud against either the company or the minority shareholders;
• where the directors are likely to derive a profit or benefit – or have profited or benefited – from their negligence or their breach of duty; and
• any act or omission where the interest of justice so demand.

Shareholders may bring an action in court through, a member’s direct action, personal or representative action, or derivative action.

CAMA introduced  the concept of significant control reporting into Nigerian company law. Persons with significant control in any company are now required to disclose to the company the particulars of such control within seven days of acquiring such significant control. Companies, must in turn, notify the CAC within one month of receipt of the information, disclose the information in their annual returns to the CAC, and update their registers of members with the appropriate details.

A significant control arises where a person:

• directly or indirectly holds at least 5% of the shares or interest in a company or limited liability partnership;
• directly or indirectly holds at least 5% of the voting rights in a company or limited liability partnership;
• directly or indirectly holds the right to appoint or remove a majority of the directors or partners in a company or limited liability partnership;
• has the right to exercise significant influence or control over a company or limited liability partnership; or
• has the right to exercise significant influence or control over the activities of a trust or firm where it is a legal entity but would itself satisfy any of the first four conditions if it were an individual.

Substantial shareholders in public companies, who either by themselves or by their nominees, hold shares that entitle them to at least 5% of the unrestricted voting rights at any general meeting must notify such companies in writing within 14 days of becoming aware of their substantial shareholder status. A public company is required to notify the CAC of a substantial shareholder within 14 days of receiving notice of such a shareholder.

For improved transparency in the financial dealings of companies, the regulators in Nigeria have set the following mandatory financial reporting requirements for companies.

• Companies are required to file annual returns with the CAC. Newly incorporated companies are required  to file 18 months after incorporation. The annual returns comprise details in the audited financial statement of the company such as turnover, net asset, gross assets, charges and liabilities and persons with significant control.
• Publicly quoted companies are required to file annual reports, corporate governance reports and quarterly financial statements with the SEC.
• Publicly quoted companies are required to file returns and financial statements annually with the FRCN.
• Banks and deposit financial institutions and insurance companies are required to file a statement of affairs on the first Monday of February and the first Tuesday of August annually with the CAC.
• Banks and financial institutions are required to forward the audited financial statements of each financial year to the Central Bank of Nigeria (CBN).

According to the NCCG, companies must submit their corporate governance report. This report should outline how they have implemented the principles of the NCCG, allowing shareholders to assess their application. Companies must also specify whether they have adhered to the NCCG’s provisions and, if they do not, they are required to provide reasons for non-compliance. The NCCG further stipulates specific details to be covered in the corporate governance statement in the annual report – for example, board structure and composition, directors’ meetings, director remuneration, policy on sustainability, corporate social responsibility, whistle-blowing, and code of conduct.

The filings a company is expected to make include:

• annual returns;
• return on allotment of shares;
• notice of change of directors;
• notice of change of address;
• notice of increase in share capital;
• registration of charges;
• notice of statement of affairs;
• notice of change of secretary;
• notice of change of substantial shareholder;
• notice of resolution to wind up;
• returns on appointment of receiver;
• court orders; and
• filling of special resolution.

The above-listed filings are made publicly available at the SEC and can be inspected by the public upon an application to the SEC.

The filings are required to be submitted within specific timelines provided by the law and non-compliance would result in payment of a penalty, which ‒ depending on the filing – would be a flat fee or daily penalty.

A company is required to appoint an external auditor in connection with its financial statement. However, in line with the ease of doing business and in accordance with CAMA, small companies are exempt from the requirement to appoint auditors.

Although directors are responsible for the preparation of the company accounts in accordance with all relevant law and regulations, auditors report on whether the accounts meet the requirements as asserted by the directors. However, this does not relieve the directors of their responsibilities.

The fundamental principles governing the company–auditor relationship are independence and impartiality. Thus, companies are expected to establish policies on the appointment and independence of auditors, as well as the scope of non-audit work an external auditor can undertake. The tenure of external auditors is limited to ten years, whereas audit partners are expected to be rotated every five years within the tenure.

The board has the ultimate responsibility for the company’s risk management systems in line with the NCCG and is expected to put in place adequate systems, policies and procedures for the identification, measurement, monitoring and control of the risks inherent in its operations. The board’s responsibility for ensuring an adequate risk management system would typically be assigned to the committee responsible for risk and audit with reporting lines to the board.

The risk management function is required to be led by a member of senior management who is a professional with relevant qualifications, competence, objectivity and experience. Meanwhile, the enterprise risk management framework provides guidance on the risk management function.

The board also has oversight on the company’s internal audit function and provides assures and oversees the implementation and effectiveness of the controls established. The objective, authority and responsibility of the internal audit function are expected to be clearly and formally defined in the internal audit charter. The internal audit function can be internal or outsourced to competent firms who report to the committee responsible for the audit.

Some requirements for directors in connection with the management of risk and internal controls are as follows.

• Risk oversight – directors are responsible for overseeing the company’s overall risk management framework. This includes identifying, assessing and mitigating risks that could impact the company’s objectives, operations or reputation.
• Risk appetite and strategy – directors should establish and approve the company’s risk appetite and risk management strategy. They should ensure that management’s approach to risk aligns with the company’s strategic goals and objectives.
• Internal control environment – directors are tasked with overseeing the effectiveness of the company’s internal control environment. This includes ensuring that appropriate internal controls are in place to safeguard assets, maintain accurate financial reporting, and comply with laws and regulations.
• Compliance oversight – directors should monitor the company’s compliance with applicable laws, regulations, and internal policies. They should ensure that appropriate compliance programs and controls are in place and that management is addressing any compliance deficiencies or issues.
• Risk reporting and communication – directors should receive regular reports on key risks facing the company and the effectiveness of risk mitigation efforts. They should ensure that there is open communication between management and the board regarding risk-related matters.
• Audit committee oversight – in many companies, the audit committee of the board is specifically responsible for oversight of risk management and internal controls. Directors serving on the audit committee should have a strong understanding of risk management principles and internal control frameworks.
• Training and education – directors should stay informed about emerging risks, best practices in risk management, and developments in relevant laws and regulations. They may participate in training programmes or seek external expertise to enhance their understanding of risk-related issues.