What Does the Board Need from a Risk Management Program?

Boards of directors play a pivotal role in overseeing and guiding their organizations toward strategic success and this involves protecting the organization from risk.

A well-designed risk management program provides the board with assurance that the organization is working to mitigate threats and maximizing on opportunities, and it provides insights to support vital decisions around strategic direction and budget & resource allocation.

Effective risk management ensures governance and provides guardrails in the form of controls to ensure the organization is operating within its desired risk tolerance – providing assurance to the board. Risk management should be fully integrated into your business operations and staff of all levels need to be involved. From operational staff completing risk assessments & control checks, to managers and team leaders who own risk areas, right through to the board who are using risk data to make important decisions – everyone has a part to play.

In this blog we explain what the board needs from a risk management program to guide the organization and ensure success. We detail the different ways risk data can be used to provide reassurance to the board and how it can highlight problems & gaps as well as potential opportunities for efficiencies and growth.

10 Things a Board Needs from a Risk Management Program

1. Clear Alignment with Strategic Objectives

A risk management program must support the organization to achieve the strategic objectives set by the board. Therefore, an ERM program must provide assurance to the board that risks are evaluated in the context of the company’s goals – whether they relate to market expansion, product innovation, or operational efficiency, risks need to be managed to ensure the strategy remains on track.

For example, the board must understand how potential risks—such as regulatory changes, operational downtime, or cybersecurity threats—could impact strategic initiatives so they can make important decisions regarding the allocation of resources and funds to reduce the most critical strategic risks. A robust ERM program must link risks to strategic priorities, ensuring that decisions are informed by a clear understanding of the trade-offs between risk and reward.

Key Consideration: Can your risk management program demonstrate how managing risks supports long-term growth and value creation?

2. Comprehensive Risk Identification and Assessment

The board requires a comprehensive view of all significant risks across the organization spanning all sites and departments. These risks should be categorized into strategic, operational, financial, and compliance-related groups.

From their risk management programs boards should expect to visualize:

• The new and emerging risks that could likely impact the organization.
• The assessment of current risks and their status, likelihood, and impact.
• A prioritized risk register based on risk appetite and tolerance to understand the most pertinent risks.

An effective risk management program should utilize tools like heat maps, risk registers, and risk scoring methodologies to visualize and communicate risk levels clearly to the board.

Key Consideration: Does your board receive a full picture of known and emerging risks, and are these risks assessed and managed in a structured and transparent way?

3. Defined Risk Appetite and Tolerance

Boards should work with the risk team to define the organizations risk appetite and tolerance levels – including the level of risk the organization is willing to accept in pursuit of its objectives, plus an individual tolerance threshold for each risk.

Without a clearly defined risk appetite framework, the risk team cannot communicate to the board whether the organization is operating within acceptable risk boundaries. A mature risk management program defines these parameters in conjunction with the board and ensures they are consistently applied across business units. This enables risk teams to advise the board when risk levels are exceeding the agreed tolerance so the board can decide on the best course of action.

Key Consideration: Do you have a clearly defined risk appetite and what is your process when risk levels exceed the agreed tolerance?

4. Real-Time, Accurate Risk Reporting

Timely, accurate, and actionable risk reporting is a critical requirement for boards. Directors need dashboards and reports that provide a high-level overview of the organization’s risk landscape – with the ability to drill down into specific areas as needed.

Effective risk reporting should include:

• Key Risk Indicators (KRIs) to understand risk levels and exposure.
• Trends and patterns to anticipate emerging threats and vulnerabilities.
• Updates on the status of controls and mitigating actions.

Using the interactive dashboards and data visualization tools available in GRC software can enhance the board’s ability to interpret and act on risk information quickly.

Key Consideration: Are your risk reports presented in a concise, digestible format that enables the board to make informed decisions?

5. Integration Across the Organization

A siloed approach to risk management is going to prevent the board from getting a holistic view of risk across the enterprise – resulting in poor decision making. The board needs assurance that the risk management program is integrated across all departments and functions, creating a consolidated view of risk across all departments and sites so they can prioritize risk effectively.

Introducing a standardized risk framework and risk management process across all departments and sites ensures that risks are identified, assessed, and managed consistently throughout the organization – and produces insightful reporting outputs. It also promotes collaboration between teams, enabling a coordinated response to complex, multi-faceted risks.

Key Consideration: Is risk management embedded into your organization’s processes, culture, and decision-making framework?

6. Effective Controls

Boards need confidence that risks are not only identified but also actively managed with effective controls. This involves building a library of controls and mapping them to each risk. These controls should be tested and checked regularly to ensure they are working and keeping that risk within the desired tolerance levels.

Boards will want to view reports on control effectiveness so they can make important decisions about allocating time and money to new controls to reduce risk in areas where the controls are not having the desired effect.

Key Consideration: Do you have an active library of relevant controls and how often and they checked and tested for effectiveness?

7. Risk Mitigation

There will always be occasions where risk levels will rise or a risk will come to fruition, so the board will want assurance that the organization has measures in place to reduce and mitigate risk when needed.

Risk teams must formulate clear escalation routes for different types of risk. This ensures that when risk levels rise, the relevant stakeholder is informed promptly so they can take action – this process will provide adequate assurance to the board. Case management workflows should also be established to ensure each risk is escalated, triaged and resolved quickly, and the steps taken to resolve the risk should be fully documented for audit processes and to ensure continuous improvement for future risk events. A robust ERM program demonstrate to the board how risk mitigation efforts align with strategic priorities and resource allocation.

Key Consideration: Does your risk management program have clearly defined processes for risk escalation and risk mitigation including case management workflows? 

8. Governance and Accountability

A strong risk management program clearly defines roles and responsibilities at every level of the organization – from operational staff to the board. The board needs to understand:

• Who is accountable for managing each risk or risk area.
• How risk management is integrated into the organization’s governance structure to ensure the organization is operating with minimal risk exposure.

Board members must also outline to the risk team the frequency and format of risk updates provided to them – this will ensure they are getting the insights they need to support risk-based decision-making.

By establishing accountability, the program ensures that risk management is not an afterthought but a core element of organizational operations.

Key Consideration: Does your ERM program outline clear lines of accountability for managing and reporting on risks?

9. Compliance with Regulatory Standards

Boards must ensure that the organizations risk management program meets all applicable regulatory and legal requirements.  Many firms are required to implement best-practice risk management programs that align with risk management standards like ISO 31000 or CPS 230. Others need risk related internal control frameworks to align with operating frameworks like COSO and SOX. The board will want reassurance that these standards are being upheld.  

Managing regulatory compliance risk is also something that boards will want oversight of. Most companies have a long list of regulatory obligations and operating standards that they need to comply with. A robust risk management program not only identifies compliance risks but also implements measures to address them proactively – providing assurance to the board.

Regulatory compliance is often linked to the organization’s reputation and ability to operate in key markets. For the board, this means receiving regular updates on compliance efforts, audit findings, and changes in the regulatory landscape.

Key Consideration: Does your risk management program provide assurance that compliance risks are effectively managed? Does your risk management program align with the requirements outlined in key standards like ISO 31000, CPS 230, SOX, and COSO?

10. A Culture of Risk Awareness

Ultimately, the board requires a risk management program that fosters a culture of risk awareness throughout the organization. This involves training employees on the risk management and escalation process, encouraging open communication about risks, having clear risk escalation routes & ownership for each risk area, and using risk data to make important decisions regarding the direction of the business and the allocation of budget & resources.

A culture of risk awareness empowers employees to identify and address risks proactively, reducing the likelihood of incidents, and enhancing overall resilience.

Key Consideration: Does your risk management program actively promote a risk-aware culture across all levels of the organization?

Conclusion

Boards play a crucial role in guiding organizations through an increasingly uncertain and volatile business landscape. A robust risk management program equips directors with the insights and confidence they need to fulfil their oversight responsibilities effectively.

Ultimately it is the board who should make important decisions about what the organizations risk appetite is, which risks they will choose to accept, mitigate or avoid, and where they want to allocate budget & resources to reduce and control risk. They will rely heavily on data from the risk management program to make those informed decisions.

By ensuring employees of all levels are engaged in the risk management program-from operational staff to the board-firms can ensure that they have visibility of risk throughout the organization, and that risk is handled, escalated, and resolved in a timely manner to protect the organization. The more risk data a company has, the more visibility and insights the board have in order to make the right decisions regarding the strategic direction of the business.

For boards, the ultimate question is: Does this risk management program provide assurance and enable us to make informed decisions, uncover opportunities, and manage risk in pursuit of our goals? If the answer is yes, the organization has a risk-informed board that is well on its way to achieving both resilience and growth.