Module: | Statutory Audit, NFRA & ICAI Standards
Q74: Consider the following statements regarding the constitution and scope of the Risk Management Committee under SEBI LODR Regulations for 2025-2026:
1. The top 1000 listed entities, determined on the basis of market capitalization, are mandatorily required to constitute a Risk Management Committee.
2. SEBI recently expanded the mandate of the Risk Management Committee to specifically include the monitoring and mitigation of ESG (Environmental, Social, and Governance) related risks.
3. The Chairperson of the Risk Management Committee must always be an Independent Director to ensure objective risk evaluation.
Which of the above statements is/are incorrect?
2. SEBI recently expanded the mandate of the Risk Management Committee to specifically include the monitoring and mitigation of ESG (Environmental, Social, and Governance) related risks.
3. The Chairperson of the Risk Management Committee must always be an Independent Director to ensure objective risk evaluation.
Which of the above statements is/are incorrect?
✅ Correct Answer: C
🎯 Quick Answer:
C. Only 3 is incorrect.Structural Breakdown: Statement 1 is correct; the mandate covers the top 1000 listed entities.
Statement 2 is correct; SEBI explicitly folded ESG risk oversight into this committee's charter to align with the BRSR framework.
Statement 3 is incorrect; while the committee must have a majority of its members from the Board of Directors (including at least one independent director), the Chairperson can be any member of the Board of Directors and is not legally required to be an Independent Director.
Historical/Related Context: Originally applicable only to the top 100 companies focusing on traditional financial hedging, SEBI expanded the applicability to 1000 companies and broadened the definition of "risk" to include cyber security and climate change impacts.
Causal Reasoning: Board-level executives (like the Managing Director) possess the deepest understanding of a company's operational bottlenecks and supply chain vulnerabilities, making them suitable candidates to chair the Risk Management Committee, provided independent directors are present to challenge them.