Changing Ecosystem of Enterprise Risk Governance

A newly released paper emphasizes the significance of risk governance in organizations and its susceptibility to internal and external influences. It underscores the importance of executives and boards in setting a strong tone at the top regarding risk governance in their organizations. This tone should prioritize and highlight the value and role of risk governance within the organization. The paper sets out on creating a network of key risk governance participants and illustrating that several dimensions should be accounted for when evaluating an entity’s risk governance.

Organizations are recognizing the increasing complexity and diversity of risks and are actively working on enhancing their risk governance processes. The decision to invest in enterprise-wide risk governance is influenced by both internal and external factors.

External actors, including regulators, shareholders, and customers, play a significant role in recommending or demanding stronger risk governance practices. Internal decision-makers, such as the board of directors and CEO, also have varying levels of interest in risk governance within the organization.

It’s important to note that enterprise-wide risk governance approaches differ among organizations. While some organizations heavily invest in comprehensive and detailed risk governance frameworks, others choose to limit the scope of their processes, allowing for a more flexible and ad hoc approach to risk management. This perspective suggests that risks can be managed implicitly as a natural outcome of day-to-day decision-making activities.

Ultimately, it is the responsibility of business function leaders and employees to implement risk governance processes. Their understanding of risk governance and access to necessary resources can impact the effectiveness of the implementation. Furthermore, the organization’s overall attitude towards risk-taking influences the level of investment in risk governance processes.

The idea of viewing the risk governance process as an ecosystem involving diverse participants with varying expectations and motivations is a novel and necessary concept. In the face of a complex and constantly evolving landscape of risks within an organization, it is crucial to engage multiple stakeholders across different departments and functions.

If you’re interested in exploring the interplay between external pressures, enterprise risk governance, and how internal demands mediate these factors, as well as the challenges faced by implementers, I encourage you to read the referenced paper for further insights.