Role of Corporate Governance in Risk Management – CIMA P3 PDF
Justyna Wachulka-Chan
- March 24, 2026
- 2 minutes read
Table of Contents
Download the PDF
Signup to our free package and get access to updated study notes, practice questions and a mini mock.
Premium
Definition & Importance
-
Corporate governance is the system by which companies are directed and controlled.
-
It ensures board accountability, financial transparency, and shareholder protection.
-
Governance frameworks vary—UK follows a principles-based approach, while US follows a rules-based approach (Sarbanes-Oxley Act – SOX).
-
Failures in governance have led to corporate collapses (e.g., Enron, Barings Bank, WorldCom).
Key Governance Principles
-
Shareholder rights & equitable treatment (OECD guidelines).
-
UK’s “Comply or Explain” rule allows flexibility for listed companies.
-
Board structure: Chairman and CEO roles should be separate; Non-Executive Directors (NEDs) must challenge decisions.
Board Roles & Effectiveness
-
Chairman leads the board & ensures communication with shareholders.
-
CEO runs company operations & executes strategy.
-
NEDs oversee executive decisions and maintain independence to reduce risk.
-
Effective boards ensure diverse expertise, formal appointments, and ongoing training.
Governance Committees
-
Nominations Committee: Manages board composition & succession planning.
-
Audit Committee: Oversees financial reporting, internal controls, and auditor independence.
-
Remuneration Committee: Determines executive pay, ensuring long-term incentives align with company success.
Internal & External Risk Reporting
-
Management develops & monitors controls, while boards evaluate risk management.
-
The Turnbull Report emphasizes risk-based internal controls in the UK.
-
Sarbanes-Oxley Act (SOX) mandates stricter compliance and documentation for US companies.
Share this Post
About the Author
Justyna Wachulka-Chan
Justyna Wachulka-Chan is a CIMA-qualified finance professional with over 20 years of experience in accounting and finance, including roles at KPMG. She founded Practice Tests Academy in 2016, helping 35,000+ CIMA and ACCA students pass their exams through structured practice questions and mock exam resources.
Table of Contents
Popular Posts
Justyna Wachulka-Chan
- July 7, 2026
- 11:37 am
Justyna Wachulka-Chan
- June 23, 2026
- 3:39 pm
Justyna Wachulka-Chan
- June 29, 2026
- 1:11 pm
Join CIMA/ACCA Achievers!
Sign up for our weekly newsletter to receive expert guidance, study resources, career tips, the latest discounts, and more.