RSK4801_Assignment 01_2016_SOLUTIONs

1
THE AIRPORT MANAGEMENT COMPANY (AMC) LTD
Introduction
The Airport Management Company Ltd (AMC) is listed on the Johannesburg Securities Exchange (JSE) and responsible for managing an international airport close to Johannesburg in the Gauteng Province, and seven regional airports spread across South Africa. AMC had experienced a decline in headline earnings and negative media coverage for a number of high profile events over the last two years.
Governance
AMC was also criticized in the last annual general meeting (AGM) by a corporate governance lobby group for not complying with the King Code of Governance with regard to risk management. The lobby group was quite vocal about the role of the audit committee, who also took responsibility for risk management oversight, and the concern that the internal audit function lacks independence as it also performed certain operational roles such as loss control and security. The board was also put under significant pressure to restructure the board and its sub-committees when it transpired that the main board were ignorant regarding the scope and impact of the events.
Question 1
[20 Marks]
You have recently been appointed as Operational Risk Manager for AMC. Your first brief received from the Chief Risk Officer is to prepare an operational risk management framework for discussion and approval at the next Board Risk Committee meeting. Argue the operational risk framework that you recommend for AMC.