In the wake of the pandemic, boards and company leaders will need the courage to expand their thinking, make mistakes, and choose progress over perfection, write Michelle Daisley and Lucy Nottingham. “You can broaden your awareness of risk, but channel that worry into a disciplined process that can generate upside too,” writes Jonathan Brill of Resilient Growth Partners in a separate essay.
Improving risk oversight has been a top-three area of focus for most boards over the past decade, alongside improving risk information that management provides to the board. Effective risk oversight is only possible when the board has comprehensive, clear visibility on risks the organization is facing and taking, as well as its steps to mitigate and manage them.
Organizations have made efforts to improve their boards’ risk information, with 60 percent of directors in a 2020 survey agreeing that the quality of risk information had improved over the years. Yet, perennial challenges and frustrations remain. Directors are looking for risk-reporting improvements in terms of ease of interpretation and drawing conclusions; highlighting vulnerabilities, common risk drivers, and cumulative impacts on the organization; and capturing a forward-looking view.
Directors often face huge volumes of material—500 pages or more—to review, with metrics on organizational performance but limited clear information to guide decision-making and provide insights into the organization’s future. In addition, board agendas often do not allow enough time for dialogue or for exploring the implications of evolving risks and potential impacts.
Faced with these challenges, and drawing on lessons learned from pandemic-related events, many boards are looking to improve risk information, as highlighted in the Global Network of Director Institutes 2020-2021 Survey Report. These efforts are a step in the right direction and align with recommendations set out in recent NACD Blue Ribbon Commission reports, including Fit for the Future: An Urgent Imperative for Board Leadership and Adaptive Governance: Board Oversight of Disruptive Risk.