Implementing Enterprise Risk Management

CHAPTER 4Stakeholder Requirements

INTRODUCTION

Who are the stakeholders of a company? How do we incorporate stakeholder value management into risk management? What steps should we take to implement it?

Any group or individual that supports and influences the survival and success of the company can be considered a stakeholder. A company's interactions with its key stakeholders shape its reputation, and the monitoring and management of stakeholders' feedback and opinions is a key element of reputational risk management. This chapter will first discuss the key stakeholder groups and their primary requirements. These stakeholder groups include:

• Customers
• Employees
• Regulators
• Communities and environmental groups
• Stock exchanges and rating agencies
• Business partners
• Institutional investors
• Proxy advisory firms
• Activist investors

The risk management function should understand their expectations, monitor their perception of the company, and provide risk transparency to them. For example, regulators need assurance that the company complies with laws, regulations, and internal policies. Stock analysts and rating agencies want to know how the company manages risk in its business and financial activities. Investors need financial and risk data to make informed decisions.

Management must provide greater transparency into the company's risk profile as the informational needs of key stakeholders continue to grow. Boards need summary information that highlights key risks and trends. Stock ...