Boards wanting more qualitative focus on risk management

A leading group of senior business executives and risk specialists, together with Airmic, has called for greater air time for risk management at the board level, given the increasingly complex and interconnected nature of global risks.

In a major report for board members published at the end of January by The Chairman's Forum and CGMA in partnership with Alvarez & Marsal and Airmic, businesses are urged to give more structured and quality time to the consideration of risk at board level, both in order to meet the new reporting requirements for risk set out by the Financial Reporting Council (FRC) and to achieve successful business outcomes.

The guide is the first of its kind to provide practical advice for senior executives on how to have an effective board risk conversation, based on research and consultation with FTSE chairmen, senior executives, non-executive directors and risk specialists. 

The report, Ensuring corporate viability in an uncertain world – framing the board conversation on risk includes commentary from key business leaders, including Sir Peter Gershon, chairman of National Grid and Tate and Lyle, and Sir Roger Carr, chairman of BAE Systems. It also includes a foreword from the chairman of the FRC, Sir Win Bischoff, and advice to boards from Airmic CEO John Hurrell. 

The report aims to set out an integrated approach for managing and reporting risk, with particular attention on: 

• Moving beyond a 'compliance' view of risk and placing it at a strategic level;
• How to define and articulate 'risk appetite', 'risk tolerance' and 'capacity';
• Stimulating more 'quality time' consideration of risk at board level and at the 'coalface';
• Integrating risk reporting across management information flows;
• Seeing the whole picture of risks as well as managing and enabling the reciprocal opportunities.

According to Julia Graham, Airmic's deputy CEO, the seniority of business leaders that contributed to the report is testament to the fact that risk management is moving up the corporate agenda. "For some years, Airmic has been encouraging businesses to take greater ownership for risk management, and it is fantastic to see that boards are really recognising that risk management is not just a compliance exercise, but that it can add value."

She added that this is a unique opportunity for Airmic members. "There are enormous demands placed on boards today and for many senior executives, finding adequate time to focus on risk management can be a challenge. One of the messages that rang clear from our conversations with boards is that senior management are looking for help on how to translate this into practice. 

"It is clear that the door is therefore open for our members to step up and support the boardroom by taking a more strategic role in risk management. The challenge for Airmic will be to help our members in doing so and we will be issuing guidance in due course."