Corporate Board Risk Oversight

09 March 2020

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What does one conjure up when those three words are brought to the fore?  To me, oddly enough heady mix of the boardroom equivalent of adrenaline pumping activities juxtaposed with snore-worthy matrixes and data collection.  In reality, they are neither as extreme nor unhelpful but actually far more critical, simple yet complicated and nuanced, and compelling than the three words suggest.

 

A survey conducted by Protiviti (on US companies but no less relevant to the UK) would suggest that whilst most organisations are very aware that risk is of vital importance to consider and manage, the actual effectiveness of the board’s risk oversight was not quite as high as expected.  Just over 50% of respondents thought that their risk oversight was effective or highly effective.  The findings from the survey are really insightful and point us to really think about how organisations perceive risk, how well they understand them and thereafter manage & monitor them.  Referring back to a previous blog about self-awareness (or lack thereof), this would be a classic case of that.

 

And on that note, this little piece is more of a ‘cheeky’ one where I attach an excellent article ‘Guidance on Corporate Risk Oversight’ by the ICGN.  Inevitably they are going to do a far more thorough, informative and interesting note than we could hope to produce.  However, I thought it would still be important to write this note to draw your attention to its importance and also to summarise the headlines and areas of focus for you to start the proverbial juices flowing.

 

So, THANK YOU the ICGN for your excellent report.

 

The report is split into 4 parts – the principles; guidance on the board process; disclosure and finally a fascinating section on some example questions for a conversation between businesses and their shareholders.

 

The Principles of Corporate Risk Oversight

  • Proactive oversight
  • Comprehensive approach
  • Risk Culture
  • Dynamic process
  • Risk Committee positioning

 

Guidance on board processes

In addition to the above, one has to consider the following

  • Non-executive directors
  • Board competency
  • Access to information
  • Chief Risk Officer
  • Dialogue with Investors
  • Investor self-assessment

 

Guidance on Disclosure

  • Comprehensive information
  • Frequency
  • Format
  • Structure
  • Policy
  • Process
  • Board competency

 

Risk oversight is and should be a key priority factor for all boards.  Done well, it can really enhance the performance and mitigate the downside for organisations.  Done in a poor manner, it can actively damage the company and its future.  We know which we would prefer.

 

As an aside, this is focused primarily on corporate boards.  Whilst the themes are all replicable over boards of all sorts, we are likely to produce something to consider for the charitable and housing association sectors too.  We will also be considering some of the typical challenges faced by organisations when considering (or not) risk.

 

 

 

 

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