Building a better conversation with the board

Risk managers and board members need to work harder at having better two way communication so that companies can take the risks that doing business in today’s world requires, as well as complying with greater levels of regulation and compliance. This was the headline finding of a recent conference organised by AIG, the European Confederation of Directors’ Associations (ecoDa) and the Federation of European Risks Management Associations (FERMA).  Rhodri Williams discusses the implications.

In the light of new, disruptive business models, a good risk conversation is more essential than ever to the success of business. As Philippe De Backer, MEP who spoke at the conference, commented “Boards need to control risks and to grab the right opportunities. They need the courage for innovation and to look forward. In the business environment that we live in, doing nothing might be the biggest risk of all”.

The risk conversation needs to be connected with all of the other board conversations so it is part of strategic planning and part of the process of developing a corporate culture. Risk is no longer only the risk manager’s sole responsibility. So, what are the key components of a good conversation?

A two-way street

It is vital that there is an open dialogue between the risk manager, the senior executives and the board. Andrew Chambers, FEE, ACCA out it very well when he said “Too often top executive teams control the flow of information through to the board to the extent that the board may be kept in the dark about important issues and risks”. He went on to say that risk managers and internal auditors need to be present at risk committees and audit committees.

While just under half of risk managers say they formally present risk management activities and conclusions to the board/top management several times a year, it can be argued that this one way communication, and that formal presentations cannot be considered to be a real dialogue. It may also not be often enough in a rapidly changing world, where the face of risk is evolving all the time. The first step therefore to a better conversation is too ensure that communication is regular, inclusive and two-way.

Keeping it simple

The second key component is clarity. In order to improve the quality of the risk conversation at board level, clear language must be a top priority, and is critical for decision making.  Each of the various risk functions, including the board itself, has its own jargon. People engagement is critical, and if risk managers and board members want to really communicate, then they need to be using the same vocabulary and language.

Simplifying language will allow board members to shift from “risk awareness” to “risk intelligence,” providing the board with clear messages. “Risk managers need to be straightforward and highlight clear moments when companies might ‘cross the line’” commented Jonathan Blackhurst, Capita plc.

Two-way communication between risk managers and board members is key in understanding the evolving risk landscape. Establishing the right process and a clear, consistent language will help to integrate risk management into critical management and board conversations, and ultimately take for it to takes is rightful place in the wider corporate culture.  “Educating boards is a huge opportunity for risk managers to become strategic boardroom advisors,” said Roger Barker, Institute of Directors “but are they ready for this new role?”

Rhodri Williams, is Vice President Communications and Public Affairs EMEA