Insights and Actions – Board

The wisdom of board members expanding their personal knowledge of risks beyond financial and compliance issues has never been more evident. Swift technological changes, disruptive innovation, dynamics of organizational governance, the pandemic, and its resulting economic and political shocks provide ample impetus for board members to expand how they view their risk management role.

In the coming year, boards should:

IMPROVE THEIR KNOWLEDGE OF ECONOMIC AND POLITICAL VOLATILITY. As noted earlier, this risk area could have profound long-term impacts that could reshape how business is done. (See “Risks to pay attention to going forward – Economic and Political Volatility” on page 12). • Board members should develop an understanding of how volatility in both the economy and politics could impact how their organizations operate.

• Boards should consider directing executive management to include volatility scenarios in crisis management plans and test such scenarios and responses.

PUSH EXECUTIVE MANAGEMENT AND INTERNAL AUDIT ON ESG RISK MANAGEMENT. Organizations should prepare for enhanced regulatory requirements and/or investor expectations on ESG reporting. The U.S. Securities and Exchange Commission and other regulators have clearly signaled interest in greater regulation in this area. Beyond ESG reporting, boards should push for an enterprisewide approach to managing ESG risks. • Request an ESG risk assessment for the organization.

• Ask executive management what frameworks are used to determine adequacy of the organization’s ESG reporting.

• Ask internal audit to perform assurance or advisory services such as those relating to assessing the design and operating effectiveness of supporting ESG controls.

PUSH FOR MORE INFORMATION ABOUT CULTURE AND TALENT MANAGEMENT.

• Consider asking for an independent assessment of the organizational culture.

• Demand that executive management keep the board apprised of relevant talent management decisions and changes resulting from the pandemic.

EMPHASIZE THE IMPORTANCE OF ORGANIZATIONAL GOVERNANCE.

• Continually and consistently emphasize the importance of risk alignment among key risk management players.

• Reject siloed or decentralized approaches to risk management.

• Promote internal audit’s role in providing independent assurance over this risk area.