Risk, ethics & culture
A changing environment
Boards continually evolve and their focus changes over time. For a time, strategy was the big issue. Many boards didn’t spend enough time on strategy, spending time instead on matters of operational detail. Now, most boards have more strategic agendas and focus on the bigger issues and the longer term. Risk has also been a thorny topic – what should boards do about risk? – and their focus on this can be variable. In our experience, some do a good job whilst others see this as a tick-box exercise and give little focus to risk.
There are a number of common traps that boards fall into when looking at risk. These include: working off a long list of risks instead of focusing on the key ones, taking a static perspective rather than thinking through the impact of a changing business or regulatory environment and scanning the horizon for emerging risk, looking at individual risks in isolation rather than the impact linked risks may have - and not giving sufficient focus to risk culture at board meetings.
Boards are now beginning to recognise the importance of the link between culture, risk and strategy, Culture is beginning to appear on board agendas, and it is also a topic clearly on the regulators' radars. (The Financial Reporting Council published its report entitled Corporate Culture and the Role of Boards just last year). But culture is often a challenging area for boards to get to grips with.
How we can help
Our philosophy in relation to risk is straightforward. The key risks a business faces are those that are most likely to crystallise and, therefore, to prevent the achievement of business objectives and delivery of its strategy. That means the starting point should be having clear strategic objectives - so the board should ask itself what is needed to achieve these objectives, and what might disrupt its plans.
At Board Alchemy, we work with our clients in a flexible way in relation to risk, ethics and culture by helping:
- the board get clarity over its role in relation to risk, ethics and culture
- improving the reporting of risk to the board
- developing appropriate measures to help the board gauge culture
- undertaking a review of the risk function to assess its effectiveness.