A FRAMEWORK FOR RISK GOVERNANCE

When it comes to approaching risks, we find that compliance is a necessary condition, but, not a sufficient one. Risk has progressively become a significant part of governing board's agenda. But what do we mean by risk and what types of risks do corporate boards face? Approaches to risk governance have been particularly influenced by regulation focused on financial risks, as a consequence of past governance crises. There are, however, many other types of risks, potentially more damaging for organisations. The role of the boards of directors has undergone a long evolution in its recent history, and today, without replacing executive management, are expected to be more interventionist, especially in the context of risk governance.

by Pedro B. Agua

Organisations are living systems that proceed in their action across multiple dimensions on a day-to-day basis. Beyond compliance to codes or good practice and standards, boards of directors’ mission is centred on making the chosen future a reality. This implies going beyond mere compliance, not least because achieving the future is a matter of initiative, not optimisation or compromise. Therefore, the due governing bodies shall use the best of their skills and knowledge to achieve their organisations’ objectives while being constrained by the need for proper governance of the multiple risks, some more strategic, which have the power to collapse organisations. The etymological origin of the word “risk” suggests semantics associated with “running into danger”. On the other hand, the word “governance”, of older origin, was originally related to the art…

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The European Business Review (Digital) - 1 Issue, September/October 2023

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