“The Board is responsible for determining the nature and extent of the significant risks it is willing to take in achieving its strategic objectives.”
UK Corporate Governance Code
Risk management – a motto:
The disruptive intelligence that pierces “perfect-place” arrogance
Richard Anderson – Chairman of the Institute of Risk Management
BP, Siemens, Microsoft, the Banks …… they all manifested major, repeated and value destroying failures in governance, risk management and compliance…
You may well think that these incidents were not you, not your organisation, That it couldn’t happen to you ….. that’s what they thought …. and repeatedly the risk failures re-occured.
At a presentation to Genius Methods guests, Richard Anderson covered the importance of Risk Management at Board level, including issues like risk capability, capacity and maturity, risk clockspeed, measurement and testing.
Genius Methods reviews risk management, strategic risk and risk challenge when performing Board Evaluations. Typically we find that Boards understand operational risk, as described and addressed by management, what we often see lacking is the handling of strategic risk, reputational risk and the taking responsibility at board level for risk appetite.
Another question that needs to be addressed by Boards and that is the “home” of risk management. Is this to be the Audit Committee or the Risk Committee. Walker recommended that risk be addressed by its own committee and this is largely been followed by financial services organisations. 36% of the non-financial FTSE organisations have also gone down this path.
Our view is that audit is about confirming and evidencing facts of the past and risk is about imagining the unknown. These views on business do not necessarily come encompassed in one person’s or committee’s ability. There definitely needs to be an overlap between these committees to ensure that there is not the proverbial gap into which everything falls.
Genius Methods guests enjoyed a roundtable discussion and shared their ideas on various aspects of risk which we have summarised into a White Paper. This covers their experiences and views on Board level risk management.