OSFI - Corporate Governance

Question 1

Define “corporate governance”.

Answer 1

Set of relationships between BoDs, managements, shareholders and other stakeholders.

Question 2

Characteristics of good corporate governance. (2)

Answer 2

• incentivizes good corporate behaviour (i.e.: advances company & shareholder interests)
• enables monitoring of operations & performance

Question 3

Contrast roles of BoDs and senior management.

Answer 3

BoDs: direction-setting, oversight of management

Senior Management: implement BoD’s decisions, oversight of operations

Question 4

What are the CRO’s roles? (2)

Answer 4

• implement risk management policy

- provide regular reports to BoDs, senior management, risk committee

Question 5

What items should a risk appetite framework contain? (3)

Answer 5

RAS: Risk Appetite Statement
RL: Risk Limits
RR: Roles/Responsibilities of those implementing risk appetite framework

Question 6

Provide a general description of a risk appetite statement.

Answer 6

It reflects LEVEL of risk, and TYPE of risk an FRFI is willing to accept in order to meet its business objectives.

Question 7

Describe the concept of risk limits within the risk appetite framework. (3)

Answer 7

Risk limits refer to the allocations of FRFI’s risk appetite statement to:

• risk categories (IMCO)
• business unit
• LoB or product

Question 8

Key features of the risk appetite statement. (4)

Answer 8

• relate to short-term and long-term strategies
• includes qualitative and quantitative measures of risk
• forward-looking
• consider normal and stressed scenarios