The Board's Role in Risk & Compliance: Part ll

“The ability to perceive and proactively mitigate risks is the compass that directs a director's vigilance in the boardroom.” - A. Cecile Watson

Introduction:

In The Board's Role In Risk & Compliance: Part I, we treated with the discipline and dynamics of risk and compliance oversight in the boardroom. In doing so we set the context to help directors better understand how they could effectively contribute to conversations on risk and compliance without needing to be a risk management expert.

As we delve deeper into the board's role in risk and compliance, the path toward vigilant governance becomes clearer. Beyond understanding the scope of the responsibilities, actionable steps and critical inquiries are essential to drive proactive risk management. In this segment, we present a sequence of actionable steps and insightful questions that directors can embrace to fortify their stance as guardians of organizational resilience.

With that said, here are 7 actionable steps and 8 critical questions directors can pose to actively participate and uplevel how they treat with risk oversight today! 👊🏾

Act It Out: Proposing Actionable Steps for Directors:

1. Get Familiar With The Work of The Risk Committee:

The Risk Committee of Boards is normally comprised of directors with relevant expertise that empowers them to holistically monitor and manage risks. The best way to uplevel your risk oversight expertise is to seek out membership on this committee. 

If such an opportunity is not readily available, you can pay attention to the reports made by the Risk Committee to the Board.  Then be intentional about asking at least one relevant question to start confidently engaging on matters related to risk and compliance oversight.

2. Gain Understanding of Risk Tolerance Levels:

Seek to understand from management the risk tolerance thresholds they use to give guidance on the risks they are taking on. These benchmarks will guide decision-making, ensuring alignment with the organization's risk appetite.

3. Actively Participate in Reviewing Risk Policies:

The organization's approach to risk should be documented in its risk policies. These will be available to you on request. If you take an active participation in scrutinizing and endorsing risk management policies, your confidence will sky rocket in contributing to risk oversight. Your focus should be to confirm that there's strategic alignment of risk mitigation practices with the organization's overarching goals.

4. Request Risk Reports:

Bolster transparency and accountability by requesting comprehensive risk reports when new initiatives, products or changes are being introduced. These reports should provide invaluable insights into how management is proposing to safeguard the business as they introduce change to the organization.

5. Encourage Whistleblower Mechanisms:

Advocate for robust whistleblower mechanisms that empower employees to report potential risks or compliance concerns without the fear of reprisal. Your policies should be in place and the tone from the top will be critical in establishing a culture of openness.

6. Monitor Compliance with ESG Standards:

It has become of great importance that companies know where they stand on sustainability and Environmental, Social, and Governance (ESG) .  If these discussions are not happening as yet in your boardroom(s), you can initiate the conversation.  Request that management provides a brief to the board regarding its duties to give consideration to ESG standards. 

If your board has already approved policies, you should be seeking to ensure that processes are in place to periodically review the organization's adherence. This commitment is required to foster continuous improvement in sustainable practices.

7. Participate in Board Education:

Invest in yourself by participating in activities that serve to enrich your understanding of emerging risks, evolving compliance frameworks, and best practices. Continuous learning enhances directors' prowess in risk management.

Questions Directors Should Pose in the Boardroom:

So hopefully by now you have some context of what constitutes the duties of directors as they carry out their risk and compliance oversight responsibilities. Here are eight pivotal questions you can pose as you become a catalyst in effecting improved contribution by the board:

1. What are the organization's most critical risks, and how are we actively monitoring and mitigating them? 

2. How well does our risk management strategy align with the organization's long-term objectives and/or commitment to ESG principles?

3. What initiatives are being undertaken to foster a pervasive culture of compliance across all levels of the organization?

4. How can we seamlessly weave risk management into our strategic planning, ensuring it's an integral aspect of our decision-making?

5. How frequently are compliance audits conducted, and what key insights have emerged? How are we translating these insights into action?

6. What contingency plans are in place to navigate potential crises? How can these plans be further refined to enhance preparedness?

7. Are there any imminent regulatory shifts that may impact the organization? How are we proactively addressing these changes?

8. How can the board effectively support and hold management accountable for their commitment to robust risk management practices?

So there you have it. Showing up to be vigilant in executing your responsibilities for risk and compliance oversight should no longer be a mystery. Just try it! And be sure to send me a message via any of my social media channels and let me know how it works for you. Bonne Chance!

Stay tuned for more enlightening discussions, gripping stories, and actionable insights. And if you haven't already, be sure to subscribe so you never miss a post. Together, we're set to build better boards and build boards better by reshaping the landscape of boardroom leadership, one director at a time.

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