November 29, 2017
FMS Quick Poll: Audit, Risk and Compliance Committees
By Financial Managers Society

How do FMS members stay on top of risk, audit and compliance in their institutions without getting bogged down by an overly complex or redundant reporting structure?

In yet another example of a relatively straightforward peer-to-peer post that first garnered interest on FMS Connect, our latest Quick Poll on risk, audit and compliance committees proved an equally popular question among the broader membership, with 133 members (83% from banks or thrifts and 17% from credit unions) weighing in on how these important areas are accounted for within their institutions.

Of the three possible configurations offered in the poll, 51% of respondents utilize only an audit committee, to which both risk and compliance report (Figure I). Meanwhile, maintaining separate audit and compliance committees or having separate audit, compliance and risk committees each tallied 19% of the vote. The remaining 11% of respondents opted for other arrangements, including separate audit and risk committees with compliance reporting to risk, a combined audit and compliance committee with risk reporting or separate audit and compliance committees with no specific risk function.



While the results of our follow-up question asking whether the specified arrangement of audit, risk and compliance oversight was working were extremely lopsided – with 94% of respondents answering in the affirmative (Figure II) – some of the explanations behind those responses weren’t quite so uniform.



Several respondents noted that splitting these functions into separate committees was the only way to stave off meeting durations that were quickly getting out of hand. Also favoring multiple committees, a number of members noted that these areas are becoming so specialized and complex that only separate, devoted committees can properly address the specific issues of each.

Those with combined committees also made the case for why their arrangement works, noting in several instances that the three areas are very interrelated and should therefore be addressed together. Others were more pragmatic, citing their smaller asset sizes or favorable examiner feedback as the reason behind their preference for combined committees.

Finally, the explanations from the handful of “no” votes to this question were equally telling – and often right in line with the explanations of why a different approach was working for some of their peers – with a few members dealing with combined committees bemoaning the length of meetings, the lack of risk focus and the overwhelming amount of information to be covered. And one CFO of a $640-million credit union with only an audit committee summed up her thoughts on coming up with a better arrangement with a simple suggestion: “We need ERM.”

Thanks again to everyone who participated in our latest FMS Quick Poll. If you didn’t have a chance to complete the poll, be sure to weigh in with your views on social media or on FMS Connect!