Boards need to ensure that risk management is a primary element of their job due to the complexity of modern business and its relentless pursuit of competitive advantage. A survey conducted by EY of board members revealed that risk oversight is at best minimal in a lot of organizations. Many board members struggle to keep up with the pace, whether it’s in the structure or format for risk reporting or the number occasions they are able to engage in this subject.

There are a few steps that could be taken to help.

The first step is for boards to develop clear reporting structures that make it simple for them to comprehend the risks their companies face. This should include a clear breakdown of the types risks that need monitoring (financial and operational, reputational etc.). A clear and concise framework also makes it easier for the board to ask appropriate questions regarding risk management — and to recognize which answers are reliable.

Second, the board needs to utilize sophisticated tools to assess the risks they faceand to decide on the best balance between risk-taking and mitigation. In addition to the more traditional options like Value at Risk (VaR) models tools such as Monte Carlo simulation can bring this process into the realm of science and allow the creation of thousands of scenarios that weigh the likelihood of loss or profit against the impact on the business’s strategy and operating model.

In the end, the board should be able monitor the most influential indicators of the risks it is facing. It should also have trigger-based www.boardroomteen.com/how-do-you-write-a-board-resolution/ action that can be activated when the trend isn’t positive. This will allow the board to respond quickly in the event of a crisis, such as ransomware.