CS Professional GRMCE key terms

The system of rules, practices and processes by which a company is directed and controlled, allocating rights and responsibilities among shareholders, board, management and other stakeholders.

The conflict that arises when managers acting for owners pursue their own interests rather than the owners' interests, creating costs that governance mechanisms are designed to reduce.

A arrangement in which one party, the principal, delegates decision-making authority to another, the agent, who is expected to act in the principal's interest.

The responsible oversight and management of assets and interests entrusted to a person or body, requiring them to act with care, loyalty and a long-term perspective.

Any individual or group that can affect or be affected by an organisation's activities, including shareholders, employees, customers, suppliers, creditors, regulators, communities and the environment.

The doctrine that a company's primary objective is to maximise returns to shareholders, subject to law, rather than balancing the interests of all stakeholders equally.

An approach in which directors pursue shareholder value while having regard to long-term consequences and the interests of employees, suppliers, customers, communities and the environment.

The body elected by shareholders to provide strategic direction, appoint and oversee senior management, and account to shareholders for the company's performance and compliance.

A board member who also holds an operational management position in the company, bringing internal knowledge to the board but potentially compromising independence of judgement.

A board member without day-to-day management responsibilities who provides independent scrutiny, constructive challenge and oversight of executive performance.

A non-executive director judged free of relationships or circumstances that could materially affect objective judgement, such as former employment, family ties or significant fees.

Freedom from relationships, financial interests or other circumstances that could compromise a director's ability to exercise objective, unbiased judgement in the company's interest.

A subset of directors delegated specific oversight tasks, commonly audit, risk, remuneration and nomination, with defined terms of reference and reporting lines to the full board.

A board committee, usually composed of independent non-executive directors, responsible for overseeing financial reporting, external audit, internal audit and the integrity of internal controls.

A board committee that sets or recommends executive pay and incentive structures, aiming to align rewards with long-term performance and avoid incentives for excessive risk-taking.

A board committee that identifies and recommends board candidates, assesses board composition and skills, and supports succession planning and diversity objectives.

The director who leads the board, sets its agenda and ensures its effectiveness, ideally independent from management and separate from the chief executive role.

The governance practice of splitting the chair and chief executive positions so that oversight of management is not exercised by the person being overseen.

Arrangements that divide authority and create mutual oversight among decision-makers so that no single person or group can exercise unchecked power.

A legal obligation to act in another party's best interests with loyalty, good faith and care, placing the beneficiary's interests ahead of the fiduciary's own.

The director's obligation to exercise the knowledge, diligence and judgement reasonably expected of a person with comparable responsibilities in similar circumstances.

A situation where a person's private interest or other loyalty could improperly influence decisions made in an official capacity, requiring disclosure and management.

A transaction between a company and a director, senior manager, major shareholder or their connected persons, requiring disclosure, arm's-length terms and often independent approval.

The amount and type of risk an organisation is willing to accept in pursuit of its objectives, expressed qualitatively or quantitatively and approved by the board.

The acceptable level of variation in outcomes around an objective, translating risk appetite into practical limits and thresholds that operating units must respect.

The structured set of policies, processes, roles and tools by which an organisation identifies, assesses, treats, monitors and reports risks against its objectives.

A living record of identified risks showing owners, likelihood, impact, existing controls, residual rating and agreed treatment actions with target dates.

The process of identifying hazards and evaluating the likelihood and impact of adverse events, both before and after controls, to prioritise management action.

The level of risk that exists before any controls or mitigation are applied, used as a starting point for judging whether controls are proportionate.

The risk remaining after existing controls have been applied, which must be compared with risk appetite to decide whether further action is needed.

A measurable metric that provides early warning of increasing exposure to a particular risk, such as staff turnover, error rates or overdue control actions.

A governance structure in which operational management owns risk, a risk and compliance function provides independent oversight, and internal audit gives independent assurance to the board.

The second-line unit that advises the business, monitors adherence to laws, regulations and internal policies, and reports compliance risk independently to senior management and the board.

The risk of legal or regulatory sanctions, financial loss or reputational damage arising from failure to comply with applicable laws, regulations, codes and standards.

A failure to meet a legal or regulatory requirement, which may trigger reporting obligations, investigations, penalties, remediation programmes and reputational harm.

The policies, procedures and activities designed to provide reasonable assurance that objectives are achieved, assets safeguarded and reporting reliable.

The tone set by leadership, including integrity, ethical values, organisational structure and commitment to competence, which forms the foundation for all other controls.

The signals sent by senior leaders through their words and actions about the importance of ethics, compliance and control, shaping behaviour throughout the organisation.

Splitting tasks so that no single person can initiate, authorise, record and review a transaction, reducing the risk of error and fraud.

An independent, objective assurance function that evaluates the effectiveness of risk management, control and governance processes and reports to the audit committee.

An independent examination of financial statements by an outside firm that expresses an opinion on whether they are fairly presented in accordance with the applicable framework.

The state in which an external auditor's judgement is free from influences that could be perceived to compromise objectivity, including fee dependence and non-audit services.

A written statement of the ethical standards and behaviours expected of directors and employees, often covering conflicts, gifts, confidentiality and fair dealing.

The reporting, usually internally or to a regulator, of suspected wrongdoing such as fraud, safety breaches or harassment, protected by confidential channels and anti-retaliation rules.

A workplace climate in which people feel safe and encouraged to raise concerns, challenge conduct and report errors without fear of retaliation.

The timely and accurate publication of material information about a company's financial position, governance and risks so that investors can make informed decisions.

Openness in decision-making and reporting that allows stakeholders to see and understand the basis of corporate actions and results.

The threshold at which information is significant enough that omitting or misstating it could influence the economic decisions of users of reports.

The obligation of decision-makers to explain and justify their actions to those they serve and to accept consequences for outcomes.

The planned process of identifying, communicating with and responding to stakeholders so their concerns inform strategy, risk management and reporting.

A shareholder vote, advisory or binding, on executive remuneration policy or actual pay, giving owners a formal voice on incentive design.

The mix of skills, experience, backgrounds, gender, age and tenure on a board, associated with better challenge, reduced groupthink and improved decision quality.

A legal principle protecting directors from liability for honest, informed decisions made in good faith, even if the outcome later proves poor.

The set of laws, regulations, codes and supervisory practices that govern an organisation's activities and shape its compliance obligations.

A company's voluntary commitment to manage its social, environmental and economic impacts responsibly and to account for them to stakeholders.

Disclosure of environmental, social and governance performance, often against recognised frameworks, enabling stakeholders to assess long-term risks and impacts.