• Date: 1/2/2014

The role of the Board 

ENR respondents report less confidence than other sectors in two areas of risk management by the Board. Only 37 percent of ENR respondents attributed their company’s success in effectively communicating risks to the Board of Directors to a strong understanding of risk issues on the part of the Board. And only 42 percent said that an appreciation by the Board of the importance of risk issues was an important factor. The average for all sectors in the global survey was 43 percent and 46 percent respectively.

Briers considers this is an age-old problem of the Board wanting one thing and management providing another. “Management wants to stay out of trouble, but the Board wants the truth,” he says. So the Board must dive deeper at its meetings or as part of its planning process and start to understand the root causes of market dynamics, to question the risk culture and management’s propensity for risk taking. “I don’t think that better reporting and dashboards will necessarily address the problem of the confidence of the Board in getting at the truth; it goes to culture,” he says.

Wilson argues that there is often a gap between the Board providing broad oversight around the enterprise risk process and the individual risks themselves. Key risks should be assigned to individual committees (the compensation committee, for example, should monitor risks like succession planning) and the Board needs to step back and evaluate how it allocates responsibility for overseeing key risks and developing the risk agenda.

Risk scenarios diversified industrials

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