Board of Directors

A company’s Board of Directors should understand and oversee the major risks it takes and ensure that its executives have a robust risk management capability in place. To assure appropriate oversight, the board must address a few key issues:

1) Board Structure- The board must decide whether risk oversight should be vested in an existing committee, new committee or divided among a number of committee

2) Board Risk Reporting– Reports to the board and its committees must go beyond raw data by setting out, for example, what the key risk-return trade offs might be. Data alone probably won’t reveal the the real issues.

3) Education and Expertise– Training programs might be needed for current and new board members. Boards should also look at whether they need new members with risk-management expertise.

4) Board Processes– Boards need to review the effectiveness of their own risk management processes periodically. They should look at their committee structures and charters, how well board members understand risk policies, and the value of interactions with the management team on risk topics.

( Jack Bergstrand author of Reinvent Your Enterprise and John Wheeler founder of Wheelhouse article in Directors & Boards Winter 2009 Boardroom Briefing)

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