For companies to grow quickly but sustainably, it’s inherent that they balance risk and reward in every strategic decision they make. The board of directors should take an active role in setting a framework for evaluating and managing risk, but too often, a long-term view of risk management gets deprioritized to address immediate needs. An EY survey reveals that 84% of boards do not believe their organizations have a highly effective risk management strategy.
To enable businesses to remain competitive, board members need visibility into current and emerging risks to make informed decisions. When organizations adopt an integrated risk management (IRM) approach, the board can gain better context on emerging threats to prioritize goals and shape their strategies. IRM will enable organizations to understand and report on the threats that matter most, while boards will have the visibility to guide decision making that’s best for the business long-term.
The Link Between Corporate Purpose and Risk
Institutional investors want to understand a company’s commitment to sustainability and corporate ethics – and they’re demanding transparency into ESG policies.
By mapping your ESG policy against key risks, the board can help your organization navigate evolving threats while remaining committed to meeting corporate goals. For instance, if your company is committed to avoiding human trafficking and modern slavery in its supply chain, you’ll need to establish processes for due diligence in approving vendors and suppliers or even countries you do business with.
Your organization can ensure commitment by continually monitoring key risk indicators (KRIs) that may signal risks in your supply chain. Your board can also help avoid material risks that could impact the long-term sustainability of your company and cause reputational damage.
Taking a comprehensive approach to risk management will help your board understand the impact of emerging risks and potential “black swan” events. By adopting technology that provides an integrated view of organizational risk, boards will get better insight into KRIs and how they align with KPIs.
How IRM Helps Boards Provide Actionable Risk Oversight
Using an IRM solution gives you the ability to provide a holistic view of all your organizational risk and how it’s connected to your overall business strategy.
- Balance risks against one another. IRM will enable your board to see how different risks are interrelated — mitigating one risk might elevate another type of risk, so you’ll have the foresight to strike the right balance to meet your organization’s risk appetite in line with your overall priorities.
- Understand risk mitigation program performance. By getting insights into data trends around risk mitigation programs, your board can understand how well each program is driving ROI for your organization.
- Connect disparate data. Using IRM means that data isn’t siloed by department any longer. Your business units and risk management teams can all collaborate to share data across the organization so that your board can identify clear trends and understand cause-and-effect across the organization. You can generate reports and executive dashboards that tell a meaningful story.
- Boards can prioritize risks based on strategic objectives. When you can map out your risks against your strategic goals, you can ensure that the risks you’re assuming are aligned with your overall purpose and ESG policy. This gives board members the insights to guide executives in determining the proper risk appetite around each strategic initiative.
Is IRM the Right Approach for Your Organization?
Using an IRM solution like Diligent gives your organization the data-driven insights it needs to understand key risks that can, in turn, drive strategy. Your board members will have the right framework to guide the executive team on mapping out and executing a strategic plan that considers both current and future risks. And because you can pull together data from the entire organization and analyze trends, they’ll be able to understand the possible impact of new threats and consider those for strategic planning.
With big-picture trends and risk analysis, you’ll be able to move beyond immediate concerns and financial reporting to collaborate on initiatives that will drive the business forward. IRM gives your board a framework for detailed risk oversight to build and execute policies to ensure that you’re correctly allocating risk management across the company.
With IRM, your board has access to the right data insights to anticipate and manage existing and emerging risk so that you can meet the needs of your company, your investors and your community.
Ready to drive better board engagement? Learn more about Diligent’s Integrated Risk Management solution.