www.boardroomteen.com/how-nonprofit-boards-can-reduce-internal-risk
Boards need to make risk management a core part of their mission due to the complexity of modern business and its relentless pursuit of competitive advantage. However, an EY survey of board members reveals that the degree of risk management in many organizations is not even basic at best. It’s not the structure or format of risk reporting, or the amount of times board members engage in this area, a lot of organizations are struggling to keep up.
There are a few steps that could be taken to aid.
First, boards must develop clear reporting structures that make it simple for them to understand the risks that their businesses face. This should include a clear breakdown of the types risks that need monitoring (financial and operational, reputational etc.). A clear framework also makes it easier for the board to ask the appropriate questions about risk management, and to determine what answers are reliable.
The board must to utilize sophisticated tools to evaluate the risks they are facing -and determine the right mix of risk-taking and mitigation. In addition to the more traditional options such as Value at Risk (VaR) models tools such as Monte Carlo simulation can bring this process into the age of science and allow the creation of thousands of scenarios that weigh the likelihood of profit or loss against the impact on the company’s operating strategy and strategy.
Finaly, the board must be able monitor the most influential indicators for the risks it’s facing. It should also be equipped with trigger-based actions that can be activated in the event that the trend is not positive. This will allow the board to react quickly in a crisis like ransomware.
