Governance – Risk Appetite and Measuring Key Performance

Support the right Board/Management relationship with ONE clear board endorsed appetite for risk

One thing is certain. Organisations do not have unlimited resources. As such, a key role for all Boards is to articulate the desired balance between the risk taken to achieve the expected return. Often referred to as “how much?”, many Boards struggle to accept that not everything can be achieved, with the resources available. This is the basis of risk appetite.

Without one endorsed and understood risk appetite, the board/management relationship is challenged as individual directors may intervene when their individual risk appetite is triggered. We often see this when some board directors have “special interest” in certain areas. Modern governance requires ONE risk appetite, providing the management with a consistent perspective on where to focus and what to deliver.

Chapter 2 of this series presented the key performance drivers for the organisation. The upper and lower targets of performance, set by the Board, provides the management the guidelines of acceptable risk/return.  This informs directors whether today and tomorrow are under control, so they can focus on next month and next year. A negative trend to either the upper or lower limit should trigger board enquiry about what management are doing to ensure the limits are not breached. In this way, the board can oversee and allow management to manage. 

Chapter 4 considered the modern oversight of emerging and identified risks. In this session, we discuss the Boards collective target for each of the identified risks, ensuring management are supported to focus on the key items and not waste time on over-mitigating certain risks.  If a board sets a low-risk appetite for a particular function or activity, they are expecting the target position of the risk to be in the “green zone”, with lower likelihood and impact. In some cases, the Board may set a high appetite for certain activity, accepting a higher likelihood of the event occurring and a preparation to accept a greater impact, should the event occur.

In this session, we’ll review a plain-English approach to articulating risk appetite, through the targets set in key performance measures. Join Simon as he explores the board’s role in defining the amount the accepted level of risk and return, in their oversight of the operations.

Topics in this series will explore how to implement each section of ‘The Modern Board Pack’:

• Implementing the Modern Board Pack
• Building Trust between Board and management  
• Developing your strategic cornerstones to a sustainable business
• Modern Risk Oversight 
• Risk appetite and measuring key performance
• The Power of Measurement to Embed Modern Governance

Learning Outcomes:

Attendees will gain an understanding of:

• a system of clear precise “key performance drivers”, supported by board-endorsed tolerance levels
• a single, board-endorsed appetite for risk/return for the operations, along with agreed areas of no tolerance

Suited to:

Company Secretaries, Company Directors, CEOs, Advisors

This On Demand includes: 

• a recording of the webinar Event which can be viewed multiple times
• a PDF of the presenter’s PowerPoint
• a verbatim Transcript
• any supporting documentation
• a CPD Certificate after successful completion of the Knowledge Quiz