Boards of Directors need to increase Risk Management knowledge and oversight, says PwC

Nassau Bahamas, 27 February 2018 – Amidst growing examples of risk management failures among some of the world’s best known brands, PwC argues that increasing the knowledge of Boards of Directors, is key to improving risk management oversight, which is a critical component of the corporate governance infrastructure.

Informed and proactive Board Directors are better able to employ the appropriate risk mitigating strategies that can save businesses millions of dollars and safeguard reputation and brand protection.

Cost savings, profitability, reputation & brand protection and regulatory compliance, are all improved when Directors invest more time in improving their risk management knowledge – this is because Directors will ask more piercing and challenging questions of management as their entities seek to maintain the desired risk culture, throughout the lifecycle of a business. 

Speaking with a group of business leaders in Nassau recently, Bruce Scott, Risk Assurance Leader for PwC in the Caribbean provided key insights on what Board members should know in discharging their risk management oversight responsibilities, “With the rapid change in the business landscape, companies should start by educating the Board to provide the right oversight for all risk management activities.  This will empower Directors to take the right action. These include defining the risk appetite, risk culture, approving a risk assessment criteria, taxonomy, risk policy and frameworks; ensuring risk management is integrated into the strategic and budget planning processes and ensuring the right tools, technology and people are in place.  At the core it’s about being clear on the practicalities of identifying and managing risks proactively and defensively, but also in ways that are flexible enough to anticipate changes in the business environment, that can enhance a company’s long-term success.”

In addition, to achieve sustained success in this business environment, entities should seriously consider identifying and treating gaps in their three lines of defense that drive their risk management process.

The three lines of defense are:

• First line of defense (line managers) is responsible for day-to-day  execution and management of risk and controls;
• Second line of defense has oversight  responsibilities with functions like risk management, quality and compliance; and
• Third line of defense is internal audit, which is responsible for independently testing that the company’s risks are being mitigated.  The third line may also include external auditors and regulators.    

“To survive and to thrive, enterprise-wide risk mitigation must be an area of acute focus for Boards,” Bruce added. “We know that significant risk is rarely confined to discrete areas in an organisation. It’s for this reason that PwC has developed a holistic approach to risk management to help protect businesses, facilitating strategic decision making and enhancing efficiency.  Our teams have extensive experience having already worked with public and private sector clients to understand and address an extensive range of strategic and operational risks”.

Speaking from their office in Nassau, Myra Lundy-Mortimer, Partner, PwC, Bahamas said, “PwC risk and management teams led by Bruce Scott, have performed extensive research on why organisations have failed to properly identify, analyse and address business risks. We’ve worked with a number of businesses regionally to provide cutting edge Enterprise Risk Management Services. Our goal is to provide business leaders with the knowledge and resources to manage enterprise-wide risk. When business leaders have the ability to collect the right information and convert this into actionable intelligence, they are empowered with a deeper understanding of their business, and of the drivers that impact performance.”