Directors can influence a company’s enterprise risk management program—a system of identifying and managing risk as well as benefiting from risk opportunities. If ERM exists in the company, you need to know how risk management is structured and how risk information flows. If an ERM program does not exist, investigate why it’s not in place and learn how it could benefit the company.
Good risk management doesn’t happen overnight. Management teams often struggle to get it right. Boards can play a key role encouraging executives to shore up risk management practices in their companies. But first you need to know what signs to look for that indicate ERM may be falling short.
Challenges for directors: