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India: Listed companies directed to form risk management panels

April 21, 2014

The Securities and Exchange Board of India (SEBI) has said that the top 100 companies listed on India bourses must establish risk management committees immediately, to comply with revised corporate governance standards which it released last week. All other companies have to implement the revised corporate governance norms by 1 October.

The capital market regulator said that the rules are applicable to insurers, banks and financial institutions to the extent that they do not clash with any regulations of their respective primary regulator, that is the Insurance Regulatory and Development Authority and the Reserve Bank of India. The rules are not applicable to mutual funds, SEBI said.

The risk management committees identify, evaluate and mitigate all risks associated with business, interest rates, currencies and other challenges companies face.

In its circular last week, SEBI said that the boards of these companies have to define the roles and responsibilities of the committee and may delegate monitoring and reviewing of the risk management plan to the panel.

For insurance companies, according to a biennial survey of insurance risks conducted by the London-based independent think tank, Centre for the Study of Financial Innovation, and the international accounting and advisory firm, PwC, that was released last August, business practices and quality of risk management are among the top risks that the Indian insurance industry at present faces. Other major risks are regulation, natural catastrophes and quality of management.

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