4 minute read 13 Apr 2020
Man sitting on cliff

Global Board Risk Survey: Four ways to advance risk oversight

Authors

Stephen Klemash

EY Americas Center for Board Matters Leader

Recognized leader in corporate governance. Experienced board member. Trusted advisor to senior executives and directors. Fervent reader. Husband and father.

Jennifer Lee

EY Americas Center for Board Matters Audit and Risk Specialist

Provider of board and audit committee insights. Conversent on financial reporting, risk and regulatory issues. Dedicated to family, team and client.

Jamie Smith

EY Americas Center for Board Matters Investor Outreach and Corporate Governance Specialist

Trusted resource on corporate governance and institutional investor trends. Researcher and analyst. Lifelong learner. Mother and nature enthusiast.

Contributors
4 minute read 13 Apr 2020

The unprecedented scale and pace of disruption in the market today requires a new way of thinking about risk and transformation.

We surveyed 500 global board members and CEOs to better understand their perspectives on today’s top risks and what resources they need to better execute risk oversight while sustaining trust in today’s business climate. Our risk survey indicates that boards can advance their oversight of risk in the following four ways, which will require enhancements to enterprise risk management, insightful risk reporting and new remits between boards and CEOs.

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Global board risk survey

Today’s unprecedented scale and pace of market disruption requires a new way of thinking about risk and transformation.

See our insights

Two hikers climbing snowy mountain
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1

Chapter 1

Reprioritize top risks to keep pace with market disruption

As market disruption and changing stakeholder expectations rewrite the risk landscape, board oversight priorities need to keep pace.

Our survey uncovered today’s top risks from the board and CEO perspective, revealing a need for stronger alignment and more rigorous oversight of key emerging risks.

Key findings

  • Today’s top risks from the board perspective are economic headwinds, cyber attacks and technology disruption
  • People issues, supply chain disruption and geopolitical turmoil are top-of-mind issues for CEOs, revealing the need for better alignment with board risk priorities
  • Culture and climate risk warrant more rigorous oversight 
Risks that will most impact businesses in the next 12 months
CEOs and NEDs prioritize the importance of people issues, supply chain disruption and geopolitical turmoil differently

Key board takeaways

  • Address today’s top threats and align on the top risks
  • Listen to stakeholders
  • Analyze megatrends and outside data sources to develop an informed point of view on the risk landscape
  • Develop a strong pulse on culture
  • Maintain robust cybersecurity risk oversight
  • Prioritize oversight of climate and sustainability in risk management
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2

Chapter 2

Turn risk into strategic value

Risk is no longer viewed as just “downside.”

Leading companies recognize that focusing on achieving performance management goals and strategic objectives requires looking at the “upside” opportunities that risks can provide.

Key findings

  • Boards seek to improve how they adjust risk appetite in response to the changing risk landscape
  • Boards want improved management of emerging risks, but talent gaps are creating challenges
  • Boards seek more sophisticated crisis planning to build risk resiliency
Significant room for improvement in managing atypical and emerging risk
Only 21% say their organization is very prepared to respond to an adverse risk event

Key board takeaways

  • Categorize risks into upside, outside and downside risks
  • Turn risk into opportunity
  • Challenge management to bolster risk management skills across the organization and upskill the risk professional of the future
  • Help management harness risk to build trust in new technology
  • Constructively challenge crisis planning and build risk resiliency
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Chapter 3

Redefine risk reporting to reflect the dynamic risk landscape

Board members are satisfied with the risk reporting they receive, but they recognize the need for improvement.

Nearly a third of board members do not receive reports on some significant risks that are on their radar, and only 21% are very satisfied with the accuracy, completeness and breadth of reports received.

Key findings

  • Boards seek more predictive risk insights and identify multiple areas for improved reporting
  • Boards must clearly communicate their reporting requirements to management
87% of boards do not believe that ERM at their organization is highly effective at providing predictive insights
Boards that clearly communicate their reporting requirements to management are much more confident in the reporting they receive

Key board takeaways

  • Request adjusted risk reporting that reflects the new risk landscape, including improved reporting on emerging risks
  • Ask for more predictive insights
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4

Chapter 4

Evolve the board’s role in ERM

Most boards believe they are well equipped to effectively oversee risk management, but there is no room for complacency.

To make sure they stay effective, boards need a dedicated focus on emerging and existential risks on the board agenda. Boards should also utilize external experts to upskill the board, advise on specialized risks and stay on top of megatrends to identify risks and uncover opportunities.

Key findings

  • It’s time for more time: key risks must be incorporated into the board agenda time
  • Survey suggests need to upskill boards
  • External advice is key to staying on top of megatrends to identify risks and uncover opportunities 
Boards request more time to effectively oversee risk
External advice is key to staying up to date with megatrends, emerging risks and potential strategic inflection points

Key board takeaways

  • Include sufficient agenda time
  • Seek outside expertise and incorporate external data
  • Assess and enhance board competency and diversity

Conclusion

Investors, regulators, consumers and other key stakeholders expect boards and risk functions to take responsibility for the expanded range of issues that are now an inescapable part of their environment. For boards, their work should be to remain vigilant, increase their own fluency around emerging risks and external trends, and continually challenge and strengthen their oversight practices to enhance the organization’s agility and ability to survive and thrive. 

Summary

Our risk survey indicates that boards can advance their oversight of risk in four ways, which will require enhancements to enterprise risk management, insightful risk reporting and new remits between boards and CEOs.

About this article

Authors

Stephen Klemash

EY Americas Center for Board Matters Leader

Recognized leader in corporate governance. Experienced board member. Trusted advisor to senior executives and directors. Fervent reader. Husband and father.

Jennifer Lee

EY Americas Center for Board Matters Audit and Risk Specialist

Provider of board and audit committee insights. Conversent on financial reporting, risk and regulatory issues. Dedicated to family, team and client.

Jamie Smith

EY Americas Center for Board Matters Investor Outreach and Corporate Governance Specialist

Trusted resource on corporate governance and institutional investor trends. Researcher and analyst. Lifelong learner. Mother and nature enthusiast.

Contributors