The better the question. The better the answer. The better the world works. У вас есть вопрос? У нас есть ответ. Решая сложные задачи бизнеса, мы улучшаем мир. У вас є запитання? У нас є відповідь. Вирішуючи складні завдання бізнесу, ми змінюємо світ на краще. Meilleure la question, meilleure la réponse. Pour un monde meilleur. 問題越好。答案越好。商業世界越美好。 问题越好。答案越好。商业世界越美好。

How boards can embed risk into strategic decision making

In a world characterized by the speed at which value is lost and created, the risk management role of the board is crucial. Navigating between the opportunities and risks of disruptive change is far from a new concept. But as the world becomes increasingly fluid, and in some cases more volatile, boards should be assessing their organizations’ approach to risk to ensure that it is considered a core component of strategy development.

Question for the board to consider

  • Has the board challenged the management to articulate how the risk function is disrupting itself and keeping up with the organization’s digital transformation strategy? How does the organization’s risk appetite align with its culture and strategic priorities?

Click here for more questions

One thing is clear — generating value requires taking risks. So, how do boards and the C-suite make informed decisions when the digital landscape is constantly changing? They need a risk framework that embraces duality — mitigating downside risks and seizing opportunities to manage upside risks. It is also important to be aware of outside risks — those that can have positive and negative impacts, but are unpredictable and beyond the organization’s control.

The transformation of the risk function beyond mitigation involves several interconnected elements. These range from utilizing data in new ways to provide a competitive advantage, using new technologies such as artificial intelligence (AI) and robotic process automation (RPA), and bringing new structures such as real-time risk reporting models. In parallel, new ecosystems will evolve to share risk intelligence among different organizations and third parties. Ultimately, new skill sets will develop to create risk professionals who are digitally savvy, data smart, versatile and have the soft skills to influence risk culture at all levels of the organization.

To ensure a functioning risk framework that is suited to the disruptive age, boards and management must guide the risk function’s transformation from being a reactive unit that only help mitigates downside risks. It should be transformed to a bifocal and strategic function that learns from the past in order to navigate future uncertainty. Please read more about turning digital risk into a competitive advantage.

This article is part of a collection of insights about digital trust.

Questions for the board to consider

  • Has the board challenged the management to articulate how the risk function is disrupting itself and keeping up with the organization’s digital transformation strategy? How does the organization’s risk appetite align with its culture and strategic priorities?
  • Does the board have evidence and confidence that downside risks are being managed efficiently? Is the organization able to shift its focus to value creation by managing upside and outside risks?
  • Has management demonstrated to the board that the organization’s talent pool and talent strategy are equipped to meet the changing needs of the risk function?
  • Does the board have confidence that the management has considered how the organization’s risk function and its strategy are linked to generate value for the long term?