When it comes to disruptive risks, the majority of them are foreseeable when there is continuous and effective coordination between Board, C-suite, and management. Conventionally, for risk management, Boards rely on information from management to help identify and provide oversight of disruptive or emerging risks with a significant and critical impact on the company’s long term sustainability, strategy, operations, financial performance, and brand reputation.
However, in the current business landscape, it becomes critical for Boards to periodically evaluate whether the information provided is sufficient and highlights areas of potential risk. Such an evaluation can include a review of board and committee meetings for a period of several years and a 360-degree review of risk management and information reporting controls, policies and procedures.
In this blog post, we will understand the primary obstacles that block the Board’s ability to identify disruptive risks in real-time and antidotes to these vulnerabilities.
Primary factors that hinder a Board’s ability to identify disruptive risks in real-time
Vulnerabilities that block information flow and require board’s immediate attention can be challenging to detect as it majorly depends on a large number of people across a vast array of business processes and environments.
However, there are certainly primary factors that hinder identification of disruptive risks, which are :
- Lack of a well defined, centralized sophisticated process for reporting and evaluating enterprise-wide risk.
- Inadequate compliance program policies, procedures, resources, expertise.
- Extensive usage of historical data that is not adequately futuristic and forward-looking.
- Information reported to the board that does not include metrics on risk patterns, trends or escalating risk concerns.
- Insufficient real-time coordination and collaboration between legal, compliance, risk, and internal audit departments that leads to “silos” and unclear information-sharing.
- Inability to stay up-to-date with the latest regulatory and compliance trends and associated business risks.
Now that we know the factors that inhibit identification of disruptive risks at the appropriate time, let us now look at the steps that enhance Risk Evaluation and management, suggested as Adaptive Governance by global Board and Directorship organizations like NACD (National Association of Corporate Directors).
Key Steps to enhance the usefulness of Risk – related information
Frequent and Periodic board meetings that include information regarding existing and emerging issues and risks, regulatory trends,
enterprise-wide risk evaluation of new business initiatives and acquisitions.
- Highlighting and emphasizing the paramount need for real-time and accurate risk reporting.
- Collaborative and well-co-ordinated Presentations to the board involving various departments like compliance, legal, risk, and internal audit, to ensure effective meetings that reflect multiple and interrelated perspectives.
- Ensuring that Boards receive insightful data regarding company culture, management integrity and transparency to report concerns without fear of retaliation.
While identifying disruptive risks is challenging, especially due to the fact that much of the information that Boards and directors receive is historic and not forward-looking, directors must ensure they are receiving sufficient information about potential and emerging risks to effectively discharge their duties of risk oversight and ERM processes need to be monitored, tracked and evaluated on a continuous basis for the Organization’s long term sustainability and success. Implementation of Risk and Compliance automation tools like ConfidentG Cyber Risk Governance product suite is an all-inclusive solution to the challenge of continuously changing Compliance and Risk trends. The Agility, Mobility, Security, and Scalability that such cloud-based solutions provider is unmatched and improves overall productivity and efficiency of important Business processes like Risk, Compliance, Audit, and Cyber Governance.
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