The new requirements

On 17 September 2014, the FRC issued an updated version of its UK Corporate Governance Code including the related document Guidance on Risk Management and Internal Control and Related Financial and Business Reporting. The revised Code will apply to accounting periods beginning on or after 1 October 2014. 

The new guidance deals with a range of topics, including risk management, internal control, and the going concern basis for accounting. Much about these topics was already covered by the existing Turnbull guidance, but the proposed new guidance looks at the risk management topics in more depth. In particular, it provides more detail on the expectations of firms and on the issues that boards should consider as part of ongoing risk management and as part of their annual review of these processes.

Boards will be expected to identify and assess the principal risks that companies face, with a more explicit expectation that firms will evaluate the likelihood of risks and their potential impact. This quantification is clearly a core area of competence for actuaries and something in which financial services firms have a great deal of experience. Stress testing and reverse stress testing are also explicitly covered for the first time – another familiar area for many actuaries.