Board Risk Committees (BRCs), after setting up a Risk Management Framework (RMF), often need to review the RMF to ensure its integrity, especially if business entities are supervised by regulators, such as the Capital Markets Authority (CMA) or the Central Bank of Kuwait (CBK).
In this context, business entities approach independent consulting firms to perform gap analysis, which means the difference between the RMF as-is state and the RMF to-be state.
What is Risk Management Framework Gap analysis?
It is a structured assessment designed to compare the existing RMF within the business entity against the best standards or frameworks adopted in this area in consideration of the latest applicable regulations. This process helps identify the gaps within the entity’s RMF and highlights areas for improvement.
Is there a regulatory mandate for conducting a Gap analysis for risk management frameworks?
Yes, as Article 6-3, clause 1 of Module Fifteenth, “Corporate Governance” of the Executive Bylaws of the CMA Law stipulates that companies are mandated to conduct periodic reviews of risk management systems and procedures and amend them when necessary to ensure their continuous effectiveness. This also aligns with Article 3-7, clause 18b, Article 3-10, clause 7, and Article 6-2 of the same Module.
Therefore, reviewing and updating the risk management framework can only be achieved by conducting a Gap analysis in line with the corporate governance systems.
What is the added value for business entities from conducting risk management framework gap analysis?
- Ensuring soundness and improving performance of the current risk management systems.
- Maximizing the benefits of updating the risk management framework compared to the costs incurred in its implementation.
- Ensuring proper risk management in accordance with applicable corporate governance regulations.
- Enhancing soundness and smoothness of processes within business entities.
What are the services provided by Baker Tilly Kuwait?
Preparation of Risk Management Framework Gap Analysis Reports.