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Discover six steps listed companies should take to prepare for risk management and internal control changes of the UK Corporate Governance Code. Read more.
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In last year’s article on risk management and internal control changes (Six steps to prepare for risk management and internal control changes), we predicted that addressing the new requirements would progress at different paces. Our conversations with companies, supported by our analysis of disclosures in 2024/25 annual reports, confirmed that those who followed our recommendations are now well progressed on their journey to compliance. For the purpose of this analysis, we categorise these companies as ‘leaders’ and those companies still in earlier stages of preparation as ‘followers’.
The leaders have made great strides in achieving a proportionate and practical response that leverages existing processes without creating duplication. They approached the change to the Code as a trigger, or even a mandate, to look at the risk management and internal controls process holistically, to challenge whether controls over principal risks are indeed embedded across the business and whether more formalisation is required to reach the next step of maturity.
Leaders who are furthest ahead on their journey are now ready to conduct a dry run, turning theory into practice. These dry runs will enable directors to test their approach, fine-tune underlying processes and visualise what the ultimate material controls declaration may look like before the first mandatory one is made. Followers, on the other hand, are yet to determine their initial list of material controls. The gap between early adopters and those still preparing is widening, but there is still time to catch up by learning from what has already been achieved. With just 18 months until the first declarations are due, there is no time to waste.