3 minute read
How We Oversee and Manage Enterprise Risk
Board Oversight
The Board has primary responsibility for risk oversight. The Board believes it is appropriate for the full Board to determine the Company’s risk profile and tolerance for significant risks, such as risks related to commodity price fluctuations and HSER matters. This allows the full Board to analyze the Company’s material risks and influence the Company’s business strategies in light of such risks. The Board regularly reviews and monitors a number of processes at the Board level in order to support our risk management efforts, including the following:
• Long-term strategic plans
• Capital budget
• Capital projects and operational/asset performance
• Hedging policy and strategy
• Debt management and liquidity
• Environmental compliance and sustainability issues
• Succession planning
• Strategic transactions, acquisitions and divestitures
• Capital markets transactions
• Oversight of management in carrying out risk management responsibilities
Fostering a culture of risk management is a Company priority. Management evaluates the enterprise risk process across the Company on a regular basis to ensure consistency of risk consideration in making business decisions. Internal risk committees, composed of senior management and subject matter experts, have been formed and meet regularly to review and assess the Company’s risk management processes and to discuss and address significant risk exposures.
Committee Oversight
Certain matters related to risks inherent in their respective areas of oversight are delegated to the various Board committees, with each committee reporting to the Board at each regular Board meeting, as indicated below:
• Financial statements, systems and reporting
• Enterprise risk management program/process
• Independent auditor
• Compliance with legal and regulatory requirements and legal/regulatory proceedings
• Internal audit (Director of Internal Audit reports directly to the Chair of the Audit Committee)
• Hotline monitoring of anonymous reporting of questionable activity
• Related party transactions, conflicts of interest and Code of Business Conduct
• Cybersecurity
• Compensation programs, primarily to ensure that compensation incentives:
– Promote responsible business decisions that are in line with shareholder interests
– Do not promote excessive risk taking
• Management retention and development
• Climate change and related risks
• Annual corporate responsibility/sustainability report
• ESG legislative, regulatory and political trends
• Scientific, medical and technological developments
• Environmental performance and regulatory compliance
• Health and safety incidents
• Employee diversity, equity and inclusion
• Board composition
• Director independence
• Company’s leadership structure
• Succession planning
• Corporate governance policies and procedures
• Corporate social responsibility
• Shareholder concerns and outreach programs
Management Oversight
Within this Board and committee risk management framework, our management team is responsible for executing the Board’s risk management program, including the following major risk categories:
FINANCIAL RISK LEGAL/COMPLIANCE RISK STRATEGIC AND OPERATIONAL RISKS
Corporate Accounting, Treasury and Internal Audit Departments
Principal responsibility for monitoring financial risks, including financial reporting, internal control matters, liquidity, debt management, commodity and interest rate hedging and credit ratings
Legal and Risk & Compliance Departments
Principal responsibility for maintaining and monitoring compliance with all corporate policies and procedures, as well as legal and regulatory matters
ESG, IT and Operations Services Departments
Oversees and monitors compliance efforts related to ESG risks, data governance, information systems and cybersecurity threats
Executive Committee and Operations Department
Oversees and monitors strategic and operational risks affecting all aspects of our business
For more information about specific risks facing the Company, see the “Risk Factors” section of our 2022 Annual Report on Form 10-K.
Investor Outreach
We Have a Robust Investor Engagement Program
We conduct extensive governance reviews and investor outreach throughout the year. This ensures that management and the Board understand and consider the issues that matter most to our shareholders and enables Chesapeake to address them effectively.
How The Board Receives Direct Feedback From Major Institutional Investors
We invite major institutional investors to meet periodically with Chesapeake’s independent directors. This complements management’s investor outreach program and allows directors to directly solicit and receive investors’ views on Chesapeake’s strategy and performance.
FALL
Conduct telephonic meetings between management and our largest investors to assess which topics are of priority
Summer
Review shareholder votes at our most recent annual meeting and current trends in corporate governance
WINTER
Review feedback from fall meetings with Board members and use it to consider governance and compensation changes and enhance proxy disclosures, when applicable
SPRING
Conduct follow-up conversations with our largest investors to address important annual meeting issues
Annual Shareholders Meeting
How You Can Communicate With The Board
Shareholders and other interested parties may communicate with the Board, either individually or as a group (including only independent directors), through one of the processes outlined on the Company’s website at chk.com/about/board-of-directors