UNITED ARAB EMIRATES Law and Practice Contributed by: Francesco Bulleri, Beshoy Mounir, Sultan Bahriddini and Noora Al Doseri, ADG Legal
6.2 Risk Management and Internal Controls Geopolitical risk is not typically addressed under a standalone corporate governance framework of gen - eral application in the UAE. However, it is addressed indirectly through broader requirements relating to risk management, internal controls, AML/CFT, sanctions, export controls, market disclosure, cyber-risk, busi - ness continuity, supply chain risk and sector-specific regulation. For listed public joint stock companies, the corporate governance framework requires a formal approach to internal controls and risk management, and recent amendments have strengthened board responsibility for the effectiveness of those systems. At board level, geopolitical risk would usually be con - sidered by the board itself, the audit committee, a risk committee or the relevant compliance function, depending on the company’s governance structure and regulatory profile. In practice, this may include oversight of high-risk jurisdictions, sanctions expo - sure, counterparty risk, supply chain disruption, for - eign exchange restrictions, financing restrictions, export controls, political instability, insurance cover - age and business continuity planning. For listed companies, the board is expected to ensure that the company has an appropriate internal control and risk management framework. The audit commit - tee typically has a central role in reviewing financial reporting, internal audit, internal controls and risk management. Senior management is responsible for implementing board-approved policies and controls, while the board retains ultimate oversight responsibil - ity. Sanctions compliance is more directly regulated. UAE companies are generally expected to: • screen customers, counterparties and beneficial owners against applicable UAE and UN sanctions lists; • comply with applicable asset freeze obligations without delay; • avoid making funds or economic resources avail -
fines, restrictions on powers, suspension or replace - ment of management, suspension of activities and licence-related sanctions. Criminal liability may also arise where an offence is committed by a legal person and the person responsible for actual management was aware of the offence and the offence occurred because of a breach of their duties. 6. Audit, Risk and Internal Controls 6.1 External Auditors Under UAE law, LLCs and joint stock companies are generally required to appoint one or more auditors in connection with their annual financial statements. The auditor must audit the company’s accounts and prepare a report for the shareholders. For public joint stock companies, the auditor is nomi - nated by the board and appointed by the general assembly. The general assembly determines the audi - tor’s remuneration, and the auditor must be independ - ent from the company and its board and manage - ment. The auditor is required to review the company’s accounts, report on the financial statements and raise relevant matters to the shareholders in accordance with UAE law and applicable governance and capital markets requirements. The relationship between the company and the audi - tor is governed by statutory independence, appoint - ment, reporting and rotation requirements. For public joint stock companies, UAE law imposes restrictions on the duration for which the same audit firm and responsible audit partner may audit the same com - pany. The auditor must not perform work that com - promises independence and must report irregularities or matters required by law or regulation. Recent governance developments have also increased the auditor’s role in relation to internal controls and risk management for public joint stock companies. The 2024 amendments to the Corporate Govern - ance Guide increased the focus on internal control systems, risk management frameworks and report - ing, with external auditor involvement in assessing or reporting on the effectiveness of these frameworks.
able to designated persons; • submit required reports; and • maintain appropriate records.
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