Staying ahead of the curve: How GCs leverage strategic risk management in a volatile business environment
In today's rapidly evolving business landscape, the ability to manage risk proactively is more crucial than ever. In this month's special edition of The Diligent Minute, Nithya Das, Chief Legal & Administrative Officer at Diligent, delves into the importance of proactive risk management and the strategies that can help organizations navigate the complexities of modern risks. Subscribe to The Diligent Minute here.
Risk management is undergoing significant transformations for many reasons. First, there is a noticeable increase in the regulatory and legal requirements organizations need to comply with. Additionally, geopolitical uncertainties such as Russia’s ongoing invasion of Ukraine and the Israel-Hamas war, as well as important elections in the U.S., UK and elsewhere, mean the layers of complexity have multiplied. Furthermore, the surge in AI innovations and rise in cybersecurity incidents and regulations globally presents new challenges and opportunities in risk assessment and mitigation across virtually every industry and sector.
Organizations that excel in managing risks proactively are often those that integrate comprehensive risk assessments into their strategic planning. They leverage data-driven insights to preempt potential risks, thereby securing a competitive edge, ensuring long-term success and opening up new opportunities for growth.
4 key actions legal officers can take to enhance risk management
The general counsel (GC) often plays a pivotal role in implementing a set of specific actions for effective risk management.
These four actions include:
- Conduct a comprehensive risk inventory: The GC should lead the initiative to map out all enterprise risks across the organization. This involves collaborating with various departments to ensure that all potential pitfalls for the business are identified and documented. It’s important that risk beyond legal and compliance risk be considered as part of this exercise. Legal officers’ expertise is crucial in analyzing how enterprise risks could impact business operations.
- Prioritize risks: The GC is responsible for guiding the leadership team and board in evaluating the likelihood and impact of identified risks and prioritizing them based on their potential impact to the organization. This requires a deep understanding of the business and its industry, as well as the legal implications of each risk. By prioritizing risks, the GC ensures that resources are allocated efficiently and that the most critical risks are addressed first.
- Cultivate a risk-aware culture: As a leader in the organization, the GC should champion a culture of risk awareness. This involves training teams across the organization to recognize, raise and respond to risks appropriately. It also requires that the GC include the full leadership team.The GC should lead by example, demonstrating the importance of compliance and ethical behavior. Regular communication and workshops on risk management can help embed a proactive risk management mindset throughout the organization.
- Regularly engage and make updates: The GC should maintain regular communication with the board and audit committee about the organization’s risk profile and the steps being taken to manage risks. This includes providing updates during board meetings and preparing comprehensive, board-friendly reports that outline current and emerging risks as well as the company’s progress to mitigate these risks. By keeping the board informed, the GC ensures that risk management remains a strategic priority and that the board has the information necessary to make informed decisions.
By actively engaging in these actions, the GC ensures that their organization not only proactively identifies and addresses risks, but also leverages risk management as a strategic tool for achieving long-term success.
Learn more about Diligent Board Reporting for Enterprise Risk Management.
