The Board's New Risk Oversight Principles


Last fall, the National Association of Corporate Directors (NACD) published its Report of the NACD Blue Ribbon Commission – Risk Governance: Balancing Risk and Reward. This spring, Protiviti published a helpful analysis of the NACD report.

Why does this concern you? Because the report identifies 10 principles boards may use to ratchet up their oversight of your company's risk management activities.

"The report offers a new way of thinking and is full of actionable recommendations that can be applied immediately in the boardroom,” says NACD CEO and president Kenneth Daly.

The report's key recommendations to corporate directors include the following guidance:

Risk is a team sport. Legislation percolating in Congress suggests that boards develop risk committees, but the report finds that delegating to a committee is part of the problem. The whole board should take ownership of risk oversight.

The Board needs to help set risk tolerance. The board should consider how much tolerance it has for variances from its risk appetite, depending on market conditions as well as the potential risk/reward equation.

Boards must take control of information flow. Boards may have inadequate information to do their job properly. Boards need to consider whether new or different information could result in changed conclusions about the company's risk profile or the adequacy of its systems. ###

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GRC expert Eric Krell supplies the Business Finance community in-depth articles and commentary examining governance, risk, and compliance.

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