Organizations cannot exploit strategic opportunities, nor can they protect themselves from potential losses or failures, without a clear steer from the top says an ACCA (Association of Chartered Certified Accountants) survey.
ACCA’s research highlights the key challenges boards face when performing their roles, but also shines a light on current risk management good practices across both smaller and larger organizations.
Key findings from the report include:
- Organizations are becoming increasingly aware of the strategic benefits of risk management, which helps them to exploit opportunities and exceed their objectives;
- Diversity enables boards to expand their skills and experience in risk; thus making them more effective collectively;
- Boards find it hard to understand and address risk culture within an organization, due to a lack of guidance and difficulty in connecting culture to organizational performance;
- Time constraints at board meetings and overly detailed risk reports can distract boards from looking at the bigger strategic picture.
Lead researcher of the report, Dr Simon Ashby, associate professor of financial services in the Plymouth Business School at the University of Plymouth, says:
“Time pressured boards operating in complex and dynamic environments can find it hard to place risk in a positive context. But those who do make connections between their organization’s strategy and risk management decisions can reap significant rewards. With risk comes opportunity, providing boards weigh up the risks and returns associated with different strategic options. We learned that risk management can enhance organizational value, as well as preserve it.
“In addition to improving professional practice we hope that policy makers will take note of our report. Corporate governance regulation, such as the UK Corporate Governance Code is a major influence on board level risk management practices, we learned that mostly this influence is positive, but there can be unintended consequences. In particular, policy makers need to recognise the difference between separation and segregation. Boards, and especially non-executives, need to maintain a degree of independence, but that does not mean they should be kept apart from the people within the organization. Boards should understand and steer the culture of an organization, so that it promotes an appropriate balance between risk and control.”
The research was commissioned in association with academics from the University of Nottingham, Glasgow Caledonian University and the University of Plymouth.