Enterprise Risk Management, 2nd Edition

CHAPTER 6The Role of the Board in Risk Management Oversight¹

 

JOHN R.S. FRASER, FCPA, FCA

Former Chief Risk Officer, Hydro One Networks Inc., Toronto, Canada

 

This chapter explains the role of the board of directors in risk management oversight. It provides the context of why this is important, and in many cases why risk oversight is now a governance requirement. The challenges faced by boards of directors are explained, as are the various methodologies for approaching the process of risk management that boards may encounter. Risk can be a confusing and complex concept and this is explored, with concise approaches provided to assist boards in their oversight role. There are several ways that boards may organize to address enterprise risk management, often by using the audit committee, the full board, or increasingly by establishing a separate risk committee. These alternatives are compared. Managing risk in a consistent way across an organization—often now labeled as enterprise risk management—is explained and the board's role in the key steps is highlighted. Overall, this chapter provides a valuable resource to board members, management, assurance providers, and academics, who oversee, report on, provide independent assurance, or study this topic. It includes references to numerous supplementary readings for the serious student of this popular and evolving governance topic.

The topic of the board's involvement in, and oversight of, risk management is a relatively recent ...