Risk governance applies the principles of solid corporate governance to identify, assess, control, and monitor risk sources across the enterprise.
Boards are becoming more active in voicing how important risk management is to proper governance – and building a culture that makes quality decisions with risks in mind. A stable risk governance model will put in place the pieces needed to drive the company forward, to not shy from risks – but to see them as a means to a positive end.
With a reported 69% of executives not confident that their current risk management policies and practices will be enough to meet future needs, it is time for risk governance to be a necessity and core business function.
Risk management is a value-add process helping businesses secure their markets and provide ways to explore new opportunities. This insight will look at three ways risk governance helps boards and senior leaders transform the organisation’s outlook on achieving strategic objectives.
Increasing Risk Assurance
When risk governance is implemented across the enterprise, boards are aware of which risk sources are present – and how they are being handled. This transparency breeds confidence in senior leaders’ ability to pursue new endeavours to grow the business.
Boards will be more comfortable to tackle higher risk projects to reap the rewards of projected returns, knowing they have a risk management structure in place that gives the certainty that no matter the adversity, the organisation is ready to address it swiftly and efficiently.
Knowing When to Pivot
When risk management is part of the core of business decision making, boards are quicker in pivoting when risks pose a threat to disrupting operations. COVID-19 is not selective on which industry it impacts. Businesses have had to react rapidly and pivot once the pandemic took a hold of our world. These pivots established new processes and ways of doing business that will be likely be here from now on. Risk governance can help businesses be more agile and proactive in finding opportunities to see the storm before it arrives, and act accordingly.
Builds Interconnectedness Awareness
Risk governance provides guidance to boards on identifying risk sources across the organisation. This identification process illuminates how interconnected internal systems are and how one external event can cause a severe disruption to operations.
Knowing how different risk sources are interconnected develops situations where collaborative efforts can commence to efficiently treat risks whose impacts span across several business units. Risk management processes will illuminate how interrelated risks are being controlled by different business units and if there are any gaps or redundancies in risk response strategies.
Wrapping Up
The world is transforming at a rapid rate, caused by a global pandemic recovery and digital revolution among other social and economic issues. As business environments become more complex with regulations and market challenges, it is time for boards across the globe to adopt risk governance as an integral part of the enterprise. Risk management processes improve decision making abilities at all levels of the organisation, leading to better awareness on risks impacting the business and how to pivot appropriately when crisis does occur.
