Skip to main content

Achieving sustainability, especially in today’s market, is reliant on proper board governance. As a company grows in size and its structure changes accordingly, the importance of ERM or Enterprise Risk Management is a necessity for proper board governance and seamless operation. As a business owner, you should understand the board’s duties as they apply to everyday operations. While management is responsible for overseeing operations involving risk, the board plays the most vital role in everyday practices and procedures.

Though ERM is an integral part of board governance, only half of surveyed companies have a functioning ERM plan in place, according to the National Association of Corporate Directors. This is an astonishing and worrisome figure, especially when considering the current state of today’s volatile market.

Common issues of ERM in board governance include:

  • Fragmented or incomplete oversight of risk management across the board
  • Insufficient evaluation of risk and/or board inexperience to handle risk management
  • Inability to hatch a comprehensive risk management plan because of a lack of discourse or strategic insight within the board
  • Weak or non-existent leadership from chief officers of the board concerning risk management

Though these issues can be cumbersome, there are ways to strengthen the board’s ability to conceive and execute a comparable ERM plan:

  • Establish a risk management team. A subcommittee which focuses on risk management can be a vital and effective component of board governance.
  • Integrate strategy plans and risk plans. Make sure each strategic element of the board is accompanied by an equally strong risk management plan.
  • Create a strong communicative relationship between the risk subcommittee leader and the chief officer(s) of the board. Doing so will ensure that the ERM plan is closely aligned with all board governance issues and implementations.
  • Employ a plan which will protect the board from unforeseen or catastrophic risk.

 Please contact us for more details on how our members can help your firm make the connection between risk management and board governance.

Leave a Reply