The Handbook of Board Governance, 2nd Edition

31Risk Oversight for Directors: A Practical Guide

Stephen J. Mallory ICD.D FCIP CRM BA

Risk and Insurance Industry Executive, Experienced Board Member, and Risk & Governance Committee Chair; Instructor of Risk Management at the Institute of Corporate Directors in the Master's in Financial Accountability Program at York University, and with the Governance Professionals of Canada

Introduction

Following the financial crisis of 2008–2009, much criticism was directed toward boards for failing to properly oversee risk. Not only did the lack of risk management and oversight contribute to a massive erosion of corporate value, but boards, including independent directors, were exposed to much anxiety and personal liability. Since then, boards have devoted more attention to risk management and to their board charters, which in many cases hold them responsible to oversee the management of the principal business risks of their organizations. Not surprisingly, ERM has since become a popular discipline practiced around the globe and recommended by the governing bodies for numerous industries, including notably in the financial services, healthcare, and government sectors. National accounting institutes now guide constituents on managing and overseeing risk, such as with the Chartered Professional Accountants (CPA) of Canada's “A Framework for Board Oversight of Enterprise Risk” first introduced in 2012 and since updated.¹

Director institutes are now routinely training new board members on ...