A Risk Governance Index

Abstract

This paper aims to investigate the behaviour of the board regarding the effective identification and governance of risk by providing strategic direction and verifying the responsible use of resources resulting in better performance. This is achieved by constructing a risk governance index for a given corporation.

The various elements affecting risk governance by the board of directors are captured in the risk governance index. For each board, we assign a value for each risk governance benchmark that is met. The index is a measure of the strength of the risk governance function at the given corporation in each year.

If risks are well managed in a company then investors will be willing to invest in their projects and this will allow the company to seek the necessary resources required to implement their business strategy.

Keywords: risk, governance, index

JEL Classification: G2, G34