KPMG-SLID Audit Committee Forum

• A View from the Board: Managing emerging risks in Audit Committees

The 30th session of the Audit Committee Forum (ACF), titled “A View from the Board: Managing emerging risks in Audit Committees,” was held on Tuesday, 25 March, at Port City Colombo. 

The event brought together industry leaders and experts to discuss the evolving landscape of risk management. The session was inaugurated by Sri Lanka Institute of Directors (SLID) President Aroshi Nanayakkara welcoming the audience. This was followed by a brief introduction by Moderator and Forum Chairman KPMG in Sri Lanka and Maldives Partner and Chief Operating Officer Suren Rajakarier. He took the opportunity to celebrate the conclusion of 10 years of service by the ACF and thanked the founders for their immense contribution over the years. He also set out the objectives of the Forum, which serves as a platform to exchange ideas, insights, and strategies on how audit committees can help boards proactively navigate emerging risks that continue to challenge traditional structures.

The panel featured distinguished experts and Independent Non-Executive Directors the from large corporates in the country, including Yohan Perera, Saktha Amaratunga, Jeevan William, Thusitha Perera, and Hayleys Group ESG General Manager Prashani Illangasekera. The discussion revolved around key areas such as how boards can adjust to evolving risks in a fast-changing environment, gain insights into the ESG landscape and its effects on global supply chains, understand how audit committees can prepare for new reporting requirements, and interact with industry leaders and experts to develop strategies for navigating emerging risks.

Setting the stage for the discussion, Prashani Illangasekera delivered a practical insight to Emerging Risks at Board level with real life examples and highlighted the ESG landscape, including the manifestation of interconnected risks, the impact of rainfall, emerging ESG regulations, and customer expectations regarding ESG. She emphasised that ESG risks should not be viewed in isolation but as part of the broader risk landscape, explaining the interconnectedness of risks. She also touched upon IFRS sustainability reporting standards, the complexities of integrating ESG risks, and outlined key priorities for boardrooms. 

The forum then transitioned into a dynamic panel discussion led by Suren Rajakarier, where key questions around emerging risks and the Board’s view for managing them by an Audit Committee were addressed. Commencing the panel discussions, Jeevan William, approached the topic from a broader risk management perspective, asserting that risks and rewards are two sides of the same coin, inherently linked, and that risks can serve as a source of competitive advantage. He emphasised the importance of fostering a culture of risk management and discussed strategies for managing emerging risks, the principles of risk management, and the roles of audit and risk committees. He highlighted the importance of segregating risk and audit committees to allow better focus and more time for risk related agenda items. 

Yohan Perera highlighted the importance of Proactive Risk Identification, where audit committees should work closely with management to continuously identify and assess emerging risks, this involves staying updated on industry trends, regulatory changes, and technological advancements that could impact the organisation. He also stressed that the audit committee needs to have sound knowledge on these areas to make sure that there are adequate systems in place under the Internal Audit department or a risk unit to identify emerging risks. 

Thusitha Perera commenting on holistic risk management emphasised on using advanced analytics and big data to offer deeper insights into risk patterns, enabling a predictive approach to managing emerging risks, allowing the organisation to be more resilient and proactive. She also commented on continuous monitoring and reassessment by setting up key risk indicators (KRIs) as a method to manage risks.

Saktha Amaratunga mentioned talent and fraud risks emerging as key concerns, especially in Sri Lanka due to the shortage of human resources resulting from the brain drain during the recent past. A strong whistleblowing policy was cited as an essential mechanism for identifying and addressing such risks. However, its implementation remains weak in many organisations, he lamented. The panel emphasised that management must take an active role in embedding whistleblowing practices to reinforce transparency and accountability.

During the interaction with the audience the role of the board in risk identification and oversight was discussed further. Some aspects covered included that ESG risks must be assessed in alignment with business strategy rather than being viewed in isolation and organisations should have a system in place to identify, measure manage and report risks. Effective leadership, they noted, is key to ensuring that risk management is not merely a compliance exercise but a core aspect of decision-making. The board must take responsibility for setting up a structured risk management process, while management must ensure its execution across the organisation. Furthermore, both parties must collaborate to determine an appropriate risk appetite that aligns with business objectives.

As the session neared its conclusion, the focus turned to the question of who bears the primary responsibility for managing emerging risks, between the management, the board, or the audit committee. While perspectives varied, the conversation reflected a balanced exchange of views from all participants concluding that directors can provide an oversight while management must take more responsibility to identify and manage risks. 

Closing the discussion, Suren Rajakarier remarked that audit committees and boards should focus on asking the right questions to strengthen oversight and improve overall risk preparedness. Also, the Board and all Committees should be prepared to ask relevant questions and at times the difficult questions from management, if they are to fulfil the fiduciary responsibilities undertaken by them the forum proved to be a highly engaging session, drawing active participation from industry experts who shared their insights and experiences. Their contributions added depth to the conversation, fostering meaningful knowledge exchange and encouraging new perspectives on the evolving oversight role of audit committees in managing emerging risks.

The Audit Committee Forum was organised by Sri Lanka Institute of Directors with KPMG Sri Lanka as the Knowledge Partner, to share best practices, and elevate the standard of corporate governance in the Sri Lankan business community.