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CS Professional · Environmental, Social and Governance (ESG) - Principles and Practice · Risk Management

Sagar Chemicals Ltd, a top-1000 listed entity, has a Risk Management Committee. During a meeting, the committee reviews ESG-related risks including climate exposure. Which course of action is most consistent with the governance framework in India for such a committee?

The committee should frame, monitor and review the risk management plan, which covers sustainability and ESG-related risks along with cyber security, and then report to the board. It supports the board rather than replacing it, and its scope is not limited to financial risk.

  1. AThe committee frames, monitors and reviews the risk management plan including cyber security and ESG-linked risks, and reports to the boardCorrect
  2. BThe committee replaces the board and approves all risk decisions finally without reporting
  3. CThe committee deals only with financial risk since ESG is outside risk governance
  4. DThe committee meets once a year only for approving the audit report

Explanation

Under the SEBI Listing Regulations, the Risk Management Committee formulates a detailed risk management policy covering internal and external risks, including financial, operational, sectoral, sustainability (particularly ESG), information and cyber security risks, and monitors and reviews it, reporting to the board. It does not replace the board, and it is not limited to financial risk or to an annual meeting.

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