Culture, expertise, risk management tools, risk aversion and independence of mind of non-executive directors, risk committees, process and languages are key indicators that can be used to assist Boards in understanding the maturity of risk management in their organisation, according to a recent Chartered Secretaries Australia (CSA) and SAI Global paper.
The paper, which analyses these indices risk management maturity to ensure companies understand the complexity of their practical application, suggests that Boards need to be able to move beyond intuition to more structured ways of anticipating and overseeing risk management in order to address such indicators.
“The global financial crisis, coupled with geopolitical and natural disasters of recent times, demonstrate that there is a number of events that have the potential to undermine the viability of organisations and without adequate risk management techniques in place, organisations are extremely vulnerable,” said Douglas Gration, vice-president of CSA.
The paper was launched on the back of a CSA and SAI Global survey, which invites directors, company secretaries and risk managers working in listed entities to determine the importance of the indicators of governance and risk management maturity.
Recent research from Protiviti also found that in the wake of the global financial crisis, almost two-thirds of companies are more focused on providing better quality risk management information to their Board and executive.
The top priority for Boards and management is a stronger focus on material business risks, while companies were also endeavouring to better integrate their business strategy with risk management as a result of the global economic crisis.
The findings “confirm that the organisation’s top brass acutely understand that good risk management is fundamental to business performance”, said Mark Hamill, managing director of Protiviti.
“Keeping a weather eye on material and emerging risks is essential if the board and management are to steer the organisation through potential pitfalls and take advantage of new opportunities.”
Hamill added that it is very important that organisations are doing their bit to support management and the Board with more accurate, useful and objective reporting on the status of risk management and organisational controls.
“While the head of internal audit, chief risk officer and chief financial officer are the key players in ensuring appropriate information is relayed to the very top, all levels of management should play their part in promoting transparency,” he said.
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