In light of the recent failures by some on Wall Street, nearly all boards everywhere are reassessing their risk-oversight duties and abilities to adequately monitor their risks. Some boards may find to boost their collective abilities in this area that they need to add new directors with experience in the area of risk that mirrors their organization.
For example, if you are BP, would a Chief Risk Officer of a financial institution be a great board member for your organization? Directors themselves need to have the right background and information necessary to evaluate what they’re being presented with. To optimize your risk oversight responsibilities, it would be wise to select those board members who could best advise the board of their risk exposures. Boards also need to make sure a portion of their agenda is dedicated to the risk discussion. Asking more questions and prompting management to follow through with the answers is imperative to successful risk oversight.
Also the board should delegate a specialized committee devoted to risk, conduct periodic tutorials with management and outside experts with respect to risk, and thoroughly review the company’s risk-management system on a regular basis. This routine follow through of risk oversight management would benefit a company’s risk conduct immensely.
