To help risk managers and boards of directors educate each other, and to help boards make better risk management policy, structured board workshops can often accelerate progress. Try these five sections for your next meeting with the board:
1. Board member perspectives: Begin with members sharing their formal (or informal) exposures to risk management in other industries, professional disciplines or even personal interests (e.g., private pilot, boating, wilderness hiking). Summarize by drawing together lessons on systematically finding risks in “dark corners,” building risk into culture, and making risk-return aware decisions. Along the way, you are demonstrating your desire to harness the experience of members.
2. Current-state snapshot: Walk through the risk management activities already happening in your organization. For business lines, geographies, and functional areas, review the silos of activities. This includes the techniques used, extent embedded in the business and results achieved. A “dots and lines” graphic can help illustrate the extent to which they are connected. This is an opportunity to harness the existing “good stuff,” better connect it across silos, share techniques, and more deeply embed it in the business. It also makes clear to the Board that you are personally reaching out across the entire executive team.
3. Accelerate with best practices: Against the backdrop of current board member and organization knowledge, compare to cross-industry and industry-specific best practices. Depending on your industry, this will be four to six documents. Don’t fall into the trap of misapplying the design intent of a practice. For each best practice, review the key principles, framework (touching on process model, maturity model, roles and responsibility charts, glossaries and supporting user communities). Along the way, make clear that you are not reinventing the wheel and are accelerating time to benefit.
4. Bring it together. This section of the workshop has three steps:
a. Review existing business and performance objectives. For each one, create an initial view of the risk to achieving that performance objective. This indicator of risk will focus priorities in the next step.
b. Compare current and desired state for reducing risk to performance (and improving compliance, where applicable).
c. Compare current actions and capabilities with potential improvements from a) better integrating existing internal actions and b) more fully using external best practices. Highlight those risk capability improvements most needed to better achieve the business performance objectives.
Together, this helps demonstrate that you are driving efficiency and effectiveness in pursuit of business outcomes.
5. Action plan: Conclude your workshop with three steps:
a. Assign three types of actions: capability building, risk management process improvements, and improvements in risk-return aware decision-making that drive better business outcomes.
b. Establish or update your organization’s willingness to take risk. Use this as a touchstone in all risk-return aware decision making. Establish appropriate variations among business lines and/or geographies.
c. Establish a follow-up plan for a) ongoing focus by the Board and b) building risk-return awareness into the Board’s own activities. Many enterprises snatch defeat from the jaws of victory when the fail to follow-through on workshops. Improve your personal success with a solid follow-up plan.
Brian Barnier, of ValueBridge Advisors, is a member of the Risk Editorial Advisory Board. A longer version of this article will appear in the May issue of Exchange magazine.