What is the primary role of the audit committee in risk oversight?

The primary role of the audit committee in risk oversight is closely tied to overseeing the financial reporting process. This responsibility involves ensuring that the company’s financial statements are accurate, transparent, and comply with applicable regulations and standards. By focusing on the integrity of the financial reporting, the audit committee helps identify and mitigate financial risks that could potentially impact the organization's performance and reputation.

The audit committee also plays a critical role in overseeing internal controls and engaging with external auditors, providing an additional layer of scrutiny that is essential for effective risk management. Their oversight ensures that potential risks related to financial misreporting, fraud, and regulatory compliance are appropriately evaluated and addressed, thereby enhancing the overall risk governance of the organization.

While other functions, such as strategic planning and employee performance evaluation, are important to an organization's success, they fall outside the primary responsibilities of the audit committee in terms of risk oversight. The focus of the committee is more acute on the financial implications of risk rather than the broader implications of organizational operations or strategy.