Board Risk Reporting in Disruptive Times

Risk reporting to the board may not be fit for purpose in these uncertain times. Directors are trending toward expecting more dialogue, engagement and forward-looking insights based on relevant data and information. A principled approach would help.

Boards and their companies face a constant and seemingly unending state of flux in the marketplace. Emergence of the unexpected is the norm. For boards, this highlights the importance of considering broadly unforeseen developments — both internationally and domestically — that could significantly impact a company’s risk profile and strategy-setting and execution. Given this state of play, we offer 10 interrelated principles underlying board risk reporting and engagement.

(1) Link risk reports to key business objectives. Reporting relevance is assured when risks are tied to business plans, and the critical objectives and initiatives communicated to the board.

(2) Feed board reporting off of management reporting. If the two are aligned with the only difference being depth of content, the reporting process is more elegant, and things get easier.

(3) Focus risk reporting on critical enterprise risks and emerging risks. These two risk categories provide a context for considering whether the scope of risk reporting is sufficiently comprehensive, forward-looking and focused. High-level updates on company initiatives in these risk areas allow the board to understand progress, or lack thereof, toward organisational agility and preparedness.