Committees Derived from Boards of Directors are essential components of the corporate governance structure, contributing to achieving strategic objectives, enhancing transparency and accountability, and ensuring compliance with laws and regulations. Accordingly, this topic provides a detailed explanation of the duties of these committees, their types, the importance of each committee, and the challenges they may face.

Types of Committees Derived from Boards of Directors

1. Audit Committee

Audit Committee Duties

1. Oversight of Financial Reporting: The Audit Committee is responsible for reviewing the financial reports and ensuring their accuracy and comprehensiveness, as well as ensuring that they accurately reflect the company’s financial position.
2. Interaction with External Auditors: The committee communicates with the external auditors, reviews their reports, and ensures the implementation of their recommendations.
3. Review of Internal Control Systems: The committee reviews and evaluates the effectiveness of internal control systems to ensure the protection of the company’s assets and prevent fraud.
4. Compliance Oversight: The committee verifies the company’s compliance with applicable laws and regulations and monitors the implementation of financial policies and procedures.

The Importance of the Audit Committee

1. Ensuring Transparency: The Audit Committee enhances the transparency of financial operations and contributes to building trust with shareholders and other stakeholders.
2. Detecting Misstatements: The Committee helps detect potential errors and manipulations in financial statements, reducing the risk of financial fraud.
3. Improving Oversight: The Committee enhances the effectiveness of internal control systems, improving the protection of the company’s financial assets.

2. Nominations and Remuneration Committee

Responsibilities of the Nominations and Remuneration Committee

1. Determining Hiring Criteria: The Committee sets clear criteria for hiring executives and board members and identifies the required skills and experience.
2. Performance Evaluation: The Committee regularly evaluates the performance of executives and board members to ensure the achievement of the company’s strategic objectives.
3. Determining Remuneration: The Committee determines remuneration and incentive policies to attract and retain qualified talent and works to balance remuneration with company performance.
4. Succession Planning: The Committee develops succession plans for executives and board members to ensure continuity of leadership within the company.

Importance of the Nominations and Remuneration Committee

1. Ensuring Competency: The Committee contributes to ensuring that the company is managed by highly qualified individuals with the skills and experience necessary to achieve its
2. objectives. Performance Motivation: The remuneration and incentive policies developed by the committee encourage high performance and achieve targeted financial results.
3. Leadership Continuity: The succession plans developed by the committee ensure leadership continuity and prevent management gaps.

3. Risk Committee

Risk Committee Duties

1. Risk Identification: The committee identifies potential risks that the company may face, whether operational, financial, or strategic.
2. Risk Assessment: The committee assesses the impact of potential risks on the company, determines their likelihood of occurrence, and their impact on financial and operational performance.
3. Risk Management Strategies Development: The committee develops strategies and plans to manage risks and mitigate their impact on the company.
4. Risk Management Plan Monitoring and Implementation: The committee oversees the implementation of risk management plans and regularly monitors the effectiveness of these plans.

The Importance of the Risk Committee

1. Risk Mitigation: The committee contributes to mitigating the risks that the company may face, thus improving its financial and operational stability.
2. Achieving Compliance: The committee helps ensure the company’s compliance with laws and regulations related to risk management.
3. Improving Strategic Planning: The committee provides valuable insights into potential risks, which enhances the strategic planning process and informed decision-making.

4. Governance Committee

Duties of the Governance Committee

1. Establishing Governance Policies: The committee works to develop and update governance policies to ensure compliance with best practices and international standards.
2. Monitoring Compliance: The committee oversees the company’s compliance with governance policies and ensures their implementation at all levels of management.
3. Performance Evaluation: The committee evaluates the performance of the board of directors and executive directors to ensure governance standards are met.
4. Communicating with Shareholders: The committee works to enhance communication with shareholders and other stakeholders to ensure transparency and accountability.

Importance of the Governance Committee

1. Promoting Transparency: The committee contributes to promoting transparency in the company’s operations and implementing good governance practices.
2. Increased Confidence: The committee enhances the confidence of shareholders and stakeholders in the company’s management and decisions.
3. Improved Performance: The committee helps improve the performance of the board of directors and executive directors through regular evaluation and implementation of governance policies.

5. Investment Committee

Responsibilities of the Investment Committee

1. Evaluating Investment Opportunities: The committee evaluates available investment opportunities in Saudi Arabia and analyzes their financial and strategic feasibility.
2. Developing Investment Strategies: The committee develops strategies and investment plans that align with the company’s financial and strategic objectives.
3. Monitoring Current Investments: The committee oversees the performance of current investments and regularly evaluates their results.
4. Managing Investment Risks: The committee works to identify and manage risks associated with investments to ensure targeted returns are achieved.

Importance of the Investment Committee

1. Promoting Growth: The committee contributes to enhancing the company’s financial growth by making informed investment decisions.
2. Achieving Returns: The committee helps achieve financial returns that are in line with the company’s objectives and shareholder expectations.
3. Risk Management: The committee contributes to reducing risks associated with investments by carefully evaluating opportunities and developing appropriate strategies.

6. Compliance Committee

Compliance Committee Duties

1. Compliance Monitoring: The committee oversees the company’s compliance with applicable laws and regulations in all aspects of its operations.
2. Compliance Policies Development: The committee develops and updates compliance policies and procedures to ensure full compliance.
3. Employee Training: The committee provides training programs for employees to ensure they fully understand and implement compliance policies.
4. Complaint Management and Investigations: The committee oversees the management of complaints and investigations related to compliance violations.

Importance of the Compliance Committee

1. Avoiding Penalties: The committee helps avoid legal penalties and fines by ensuring full compliance with laws and regulations.
2. Enhancing Reputation: The committee enhances the company’s reputation by adhering to the highest standards of compliance and professional ethics.
3. Asset Protection: The committee contributes to protecting the company’s assets by implementing strict compliance policies.

Challenges Facing Committees Derived from Boards of Directors

1. Complexity of Laws and Regulations: Committees must navigate a diverse and complex array of laws and regulations that are constantly changing.
2. Communication and Coordination: Committee duties require ongoing communication and coordination among board members, executives, and employees.
3. Time and Resource Management: Committees face challenges in managing the time and resources available to ensure the effective implementation of their mandates.
4. Strategic Changes: Changes in strategy or the market may require ongoing modification of committee policies and procedures.
5. Training and Development: Committee members require ongoing training to ensure they are up to date with new developments in their field.

Conclusion

Ultimately, Committees Derived are a cornerstone of corporate governance, playing a pivotal role in achieving transparency and accountability and enhancing financial and operational performance. Committee mandates vary depending on their nature and objectives, but all aim to achieve compliance, improve performance, and reduce risk. Despite the challenges they face, committees can achieve significant success through the use of best practices, effective communication, and ongoing training. The presence of these committees also enhances the confidence of shareholders and stakeholders in the company’s ability to manage the business.