Which of the following statements is most accurate about the roles of standing board committees in risk oversight?

Prepare for the NACD Certification Exam with flashcards and multiple choice questions. Each question comes with hints and explanations to aid your understanding. Ensure you are fully ready for your test!

The statement that each standing committee of the board has its own specific responsibility and role in risk oversight is most accurate because it reflects the diverse nature of risks that organizations face and the specialized knowledge required to manage those risks effectively. Standing board committees, such as the audit committee, compensation committee, and governance and nominating committee, typically focus on different aspects of risk.

For example, the audit committee often oversees financial reporting and compliance with regulations, thus addressing financial risks. In contrast, the compensation committee may evaluate the risks associated with executive compensation structures that could potentially encourage excessive risk-taking. Similarly, the governance and nominating committee might assess risks related to governance frameworks and board composition. This specialization allows each committee to apply its expertise to effectively monitor and manage specific risks pertinent to their areas of focus, thereby enhancing the overall risk oversight framework of the organization.

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