The landscape for corporate boards is evolving rapidly, driven by increasing risks and heightened scrutiny. A recent survey conducted by Corporate Board Member and EY Americas Center for Board Matters, encompassing the insights of over 250 board members, reveals that boards are undergoing transformative changes to meet the demands of this new environment.
A significant area of focus highlighted by respondents is the need for open and forward-looking discussions surrounding risk management. Surprisingly, while 65 percent of directors express confidence in their board’s alignment with management regarding top risks, 38 percent and 31 percent feel the necessity for greater clarity on management’s risk appetite in the short and long term, respectively.
Why it matters: The disconnect between board members and management regarding risk appetite can hinder effective risk management.
- For companies to achieve substantial growth and innovation, calculated risk-taking is often necessary. Boards and their CISOs need to be willing to engage in strategic discussions about acceptable risk levels to ensure the company doesn’t miss out on valuable opportunities due to excessive risk aversion.
- Investors, employees, customers, and other stakeholders place trust in a company’s leadership to make informed decisions that balance risk and reward. When boards actively engage in discussions and display a deep understanding of the company’s risk landscape, stakeholders are more likely to have confidence in the company’s direction.
- Misalignment on risk appetite between the board and management can lead to compliance gaps and legal vulnerabilities. CISOs must ensure that the organization’s cybersecurity measures and practices comply with relevant regulations. Clear communication with the board is vital to ensure that the organization doesn’t inadvertently expose itself to legal and regulatory risks.
