Risk management has always been one of the most important tasks of boards. However, this year’s pandemic has put that responsibility into sharp focus. In the midst of www.boardroomteen.com/how-do-you-write-a-board-resolution rapid change, boards must be able to adapt and grow. They need to be aware of the impact of external developments on the risk landscape and long-term trends.
In order to do this, they should be able to assess the risks of projects that are new or existing in a non-biased manner. It is possible to recognize the potential issues using a simple red-amber-green evaluation, but it can be difficult for the board to obtain a precise understanding of risks. Boards can benefit from using quantitative techniques to encourage better communication between managers and boards, and to assist the board in understanding the risk appetite of management.
More sophisticated tools, such as ones derived from option pricing (the mathematical method employed to calculate the theoretical cost of an equity option), can be very helpful in helping to assess risks and prioritise issues that are emerging. They can, for example aid in determining the extent to which a particular project is exposed by credit or oil price risks, and also reveal risks management strategies.
The board should also use its knowledge of the risk profile of a company’s to inform strategic planning, as also to review and monitor internal controls. It should also make sure that all other committees on the board such as audit strategy, compliance and audit share the same understanding of the risk profile of the business.
Lascia un commento