Turkey: Directive On Responsibilities And Working Principles Of Early Risk Detection Committee Of Borsa Istanbul Is Out
Monthly Updates - August 2023

The Directive on Responsibilities and Working Principles of Early Risk Detection Committee (the "Directive") was prepared by the Risk Management, Internal Control and Compliance Directorate of Borsa Istanbul ("Borsa Istanbul") and published in its website on 27 July 2023.

The Directive was prepared and issued pursuant to Article 16 of the Articles of Association of Borsa Istanbul within the limits on the Corporate Governance Principles determined by the Capital Markets Board of Türkiye (the "CMB"). The Directive has aimed to outline and govern the duties, working procedures and guiding principles of the Early Risk Detection Committee (the "Committee") that is created and authorized by the Board of Borsa Istanbul (the "Board"). This Monthly Updates aims to provide a brief explanation on the regulations made by the Directive and highlights the essential novelties introduced therein.

Formation and Composition of the Committee

In the Directive, it is stated that the Committee shall be comprised of at least two members to be elected from among Borad's own members. If the Committee is comprised of 2 members, both of these members must be elected from among non-executive directors and if there are more than two members, the majority of the Committee's members must be elected from among the non-executive directors. However, the Committee may also be allocated non-members who are authorities in their respective professions.

Pursuant to Article 4, the Board selects the chairperson of the Committee from among its independent members. Every year, following the annual general meeting of shareholders of Borsa Istanbul, the Committee members are re-elected at the first meeting of the Board.

Finally, as it is stated in Article 4 that the Committee's reporter is the Risk Management, Internal Control and Compliance Directorate, and its secretariat is comprised of the Office of the Board and Chief of Staff of Borsa Istanbul.

Working Procedures and Principles of the Committee

Pursuant to Article 5, the Committee convenes independently upon the call of the Committee chairperson whenever it is deemed necessary in the course of business, but it meets routinely at least once every two months. The chairperson of the Board or the Committee members may also call for a meeting of the Committee as needed. The Committee chairperson sets the meeting schedule. A majority of the Committee members must vote in favor of adding a new item to the agenda in order for it to be included.

The Committee meets in the presence of a simple majority of all of its members, and it makes decisions by majority vote of those members present. The Committee chairperson shall have a casting vote.

The meeting and decision quorum rules must be properly followed for the Committee meetings to be conducted using any technology permitting remote access.

Written decisions made at Committee sessions are then signed by all Committee members. The Office of the Board and Chief of Staff of Borsa Istanbul are advised of decisions that requires the Board's authorization and the decisions that must be presented by the Committee to the Board. The Office of the Board and Chief of Staff of Borsa Istanbul maintains the Committee's decisions.

The Committee may meet with Borsa Istanbul executives, employees, independent auditors, or representatives of any persons or entities having business relations with Borsa Istanbul if and to the extent deemed necessary within its fields of activity, subject to adherence to the confidentiality principles. The Committee may also consult with and receive consultancy services from external independent specialists on issues or matters deemed fit and necessary, and may invite said external independent specialist.

Functions, Duties and Power of the Committee

Pursuant to Article 6, the Committee reviews the reports prepared by the Risk Management Department, the Internal Control and Compliance Department, expresses views and ideas on activities, issues them, and submits quarterly reports to the Board. This report deals with the level of risk of Borsa Istanbul, analyzes the aforementioned risks according to their level, the current status of the action plans to mitigate the risks and all other related matters, especially the results of monitoring key risk indicators.

The Committee also has the following additional tasks, obligations, and duties related to risk management and early risk detection:

a) to support the Board in the establishment and development of systems required for early detection of risks that could endanger the existence, development, and continuation of the Borsa Istanbul, and for monitoring of actions and measures deemed necessary in respect of the detected risks and required to be taken by the related units, as well as for risk management;

b) to identify, assess, and monitor the existing and potential risk factors that may affect Borsa Istanbul, and to create appropriate systems to manage those risks;

c) to continuously review the corporate risk management structure, and to supervise the implementation of risk management activities in strict compliance with the related decisions of the Board and the Committee;

d) to make recommendations to the Board for the establishment of a risk management culture in Borsa Istanbul, adoption of this culture by employees, and support of the same by senior management of Borsa Istanbul;

e) every January, to be used as the base for Borsa Istanbul's annual activity report's risk-related contents, to produce and submit to the Board an annual assessment report about the preceding year;

f) if and when necessary, by gathering data and reports from Borsa Istanbul's executives, lawyers, and related departments to make assessments on issues like the operating procedures of the corporate risk system, existing and potential risk factors, threats, and vulnerabilities; and

g) to assess Borsa Istanbul's risk appetite once a year and to present the Board with any potential modifications to the current level of risk appetite for approval.

Conclusion

In short, the Directive has outlined and governed the responsibilities, working procedures and guiding principles of the Early Risk Detection Committee. In the light of the Directive, the Board is authorized to execute and enforce it, and if needed could made alterations and modifications.