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The PRA consultation in respect of Board responsibilities and corporate governance includes an expectation on strategy and ethical culture
The Prudential Regulation Authority has issued a consultation in respect of Board responsibilities and corporate governance. The consultation, which closes on 14 September, aims to clarify the supervision expectations relating to those organisations which fall under the PRA remit.
Alongside such measures as succession planning, remuneration and board committees the consultation also covers organisational culture and strategy. Pointing out that the setting of corporate strategy is one of the board’s core responsibilities; the PRA expects the board not only to set the strategy but also to manage the business within a clear and prudent strategy which takes account of risk. The PRA is also looking for a sustainable business model.
When it comes to culture, the PRA is looking for one which takes account of risk awareness and ethical behaviour. Interestingly the PRA links the embedding of culture with the use of incentives “including but not limited to remuneration” as a means of helping to ensure that the required culture is embedded and enforced. It also believes that non-executive directors have a part to play in ensuring the desired culture is embedded within the organisation. This includes holding management to account for the direction of the organisation.