Getting the Board Onboard with Risk
Members of NeuGroup’s Corporate ERM look to get the board to understand risk better.
NeuGroup Corporate ERM members met in lower Manhattan on the city campus of St. John’s University to discuss a host of topics, including board interaction and interest, ERM program effectiveness and creating a risk culture across the organization. But much of the discussion concerned the board, whether it was getting board buy-in or good ways to keep the board informed or just communicating risks to the board that was most on the minds of members at the meeting.
In the ERM pre-meeting survey, all respondents say their company’s board takes an active role in the oversight of risk. Nonetheless, in several sessions, the board came up as an issue in terms of interaction and educating it on ERM risks and the function’s importance; overall, there was a slight sense of frustration with the board when it came to ERM.
Here are a few of the takeaways:
• Communicating the importance of risk. One member told the group that he was having some difficulty communicating with the board and getting it to see risks when it comes to tech; the problem is the board doesn’t grasp the importance of certain technology risks. His ERM team was looking to get the board to look at “why it should care.” It’s often the case, he said, that board members don’t get it and this could be due to how it communicates with the board; “how to get their attention in a fast pace environment.”
• Are they really getting it? Another member added that it was a challenge to get the board to look beyond the image onscreen. “How [do you] get someone to really take the time and deep thought to look at all the risks without thinking that it’s only another chart and getting through it without trying to get through it as painless as possible.” Another member says that its board has added millennials so that they can better comprehend technology risks.
• No outside influence. This member also uses different tactics when it comes to communicating risks to management, and in turn, getting them to discuss their views of topline risks. This includes putting management a room without phones to play through the risks as an exercise. Also effective was sitting down with each business unit member individually to get more information.
• Pre-board meeting scout report. Understanding individually what the board members style is a key factor to success for one member. This means trying to get a better sense of the questions it will ask, figuring out who the champions are and who among the board “are you still trying to bring along on journey?” This means “targeting presentations to those who need more help on the journey.” It also helps to have an ally on the board to move things forward, said one member.