Appropriate governance structure

[Dar_Shan0209]

Hi tutors,
From the notes, an appropriate governance structure depends on:

• the existing governance structures, eg committees and decision-making bodies;
• the size and nature of the business, eg life insurance or general insurance business for insurers;
• the risks faced by the business;
• the existing autonomy and accountability of the elements in the current corporate structure. For example, if individual business units are run autonomously, the RMF needs to support each individual business unit, rather than only operating at the ‘whole organisation’ level.

I wanted to know that if for each of the factors, there exist the corresponding appropriate governance structure. For example, in April 2019 Q3, a partnership model is suggested because WidgetCo is small and is spread geographically. I would have suggested a police and policing approach and got it wrong.

I am trying to understand if I can have sort of a checklist, as in: newly established company --> Partnership Model.

Thanks.

 

[David Wilmot]

Great question Darshan.

As you know from tutorials, one of my personal prompts is ...'there is (generally) no single right answer to SP9 exam questions'!

My other immediate thought is that these 4 factors are not independent and so there isn't a simple one-to-one answer here - for example, I'm not sure that it would always be appropriate / possible for a newly established company to adopt a 'Partnership' model from the outset.

Having said that, for me, given no other information, the preferred approach is probably the 'Partnership' model, and that is where I typically start. However, certain factors (such as the 4 you have listed) might mean that a different or layered approach is appropriate, e.g. 'partnership' with a 'policy and policing' overlay (to mitigate the risk of reduced independence under pure 'partnership').

So, for example, a company that is newly established, relatively small, geographically focused, and facing a limited range of risks might adopt a high-level policy an policing approach to start with - as the 'partnership' model might arguably be overly-complex and impractical (e.g. due to the CRF being limited in size and experience). If the company is very small then it may be that there is no CRF (i.e. no second 'line of defence') - for example, see ST9 April 2016 Q2(iii).

Such exam questions are aiming to test 'higher-order skills', i.e. test skills that go beyond the application of a simple checklist.

Does that ring true to you Darshan? What do other forum participants think about this issue?

 

[Dar_Shan0209]

Indeed, it does! Thanks so much David.