Boards are failing to navigate the changing risk landscape effectively, resulting in significant loss of value, according to research from leading players in the business community. As a result, corporate risk leadership needs rethinking and boards should consider appointing an executive voice of risk.
The above is one of the key points made in a new report, ‘Tomorrow’s Risk Leadership: delivering risk resilience and business performance’ which has been written by global business think tank Tomorrow’s Company and launched in collaboration with the Good Governance Forum members, Airmic, CIMA, IHG, Korn Ferry, PwC and Zurich.
The report challenges businesses and business leaders to consider whether the risk leadership in their organizations is sufficient to meet the demands of an increasingly fast-paced and interconnected world. While companies are usually strong at managing their core risks, all too often, the management of risk remains a siloed operation, detached from strategy.
The report’s key recommendation is that organizations consider establishing an executive voice of risk who leads the risk agenda, helps deliver the business model and drives business performance. The risk leader would be at or close to board level and should help boards to be more forward looking, enhance their decision-making capabilities and provide a corporate-wide view of risk.
The risk leader should have a strategic skillset and broad business knowledge to spot early-warning indicators of the genesis of an atypical crisis event and enable a more rounded approach to risk. Only then, according to the report, can a business truly drive resilience within the organization.
The report also says that setting the right risk culture is vital. It recommends taking an integrated approach to risk, defining the appropriate risk appetite for the organization, and creating the supporting culture and behaviours required.