The uncertainties faced by organisations today make decision making particularly challenging. The recent Risk Committee Chairs Forum (RCCF) roundtable, held under the Chatham House Rule, discussed the main challenges of decision making in these difficult circumstances. I had ten ‘takeaways’ from the discussion; the first six were considered in my previous two Risk Coalition blogs, and I discuss the final four learning points from the roundtable in this blog. So, next up, takeaway #7…
7. Get the balance right
Getting the balance right is important to make good use of time. Try and distinguish temporary changes from permanent ones which need time and focus. Non-executives also largely agree that available time typically is currently still used to discuss known issues and current risks whilst emerging risks don’t get the attention they need. One non-executive said they previously spent too much of their time on the risk framework; they have changed things so that this now occupies 20% of their committee’s time and 80% of its time can be spent on risks of the moment and looking ahead. Another said they spent too much time on financial resilience and now spend more on operational or ‘practical’ resilience. And, of course, make sure you understand stakeholder perspectives and take them into account in decision making, balancing their different expectations. Think through your response to challenge from external pressure groups. Ask whether the board gives appropriate attention to external communications, ensuring transparency and the right messages are going out. And finally, but very importantly, it is not all about what might go wrong – the risk committee should also consider what opportunities uncertainty has created for their organisation and whether it is taking the right level of risk.
8. Allow enough time to do your job
Risk committees need to have time to discuss issues and to consider matters in some depth. When it comes to dealing with uncertainty, making time to do this will be difficult but is all the more important. This is not easy, especially when the committee’s workload is already substantial. Getting the balance right (topic 7 above) will, of course, help. Deep dive sessions also allow a risk committee to consider specific issues in more detail - not just scratch the surface - giving the non-executives time for valuable discussion, debate and exploration. They provide the much-needed time and space (which the board often does not have) for ‘blue sky’ thinking. One non-executive remarked that a series of deep dives, split into sessions looking at different assumptions, worked particularly well for their organisation.
What we have learned in recent times is that global issues (such as the pandemic) can affect all organisations at the same time. This means the unexpected and additional time demands on an individual non-executive can impact all their organisations. Over-boarding becomes a bigger risk, so make sure your own time as a non-executive is managed well. Avoid taking on too many roles with the result that you find yourself stretched when your organisations need you the most.
9. It’s not all over after the meeting ends
The risk committee member’s responsibility and commitment does not come to an end when a committee meeting does. Looking back at the early days of the pandemic, my clients’ boards and risk committees were meeting very regularly, often weekly, via video call. These calls are likely to be needed at a time of crisis or period of uncertainty, to keep risk committee members informed about the work of the executive team and to give them confidence – and for them to review and assess assumptions they’ve made in relation to scenarios in the light of the changing environment. This could add quite substantially to the time commitment that a non-executive director needs to make to undertake their board role. The number of committee meetings (whether in-person, virtual or by conference call) and the frequency and nature of interactions between formal risk committee meetings should be kept under watch. Will meetings be necessary to discuss recent developments and changes, or will email or other updates suffice?
10. It is all about mindset and culture
Culture has shot up board agendas in recent times and, when it comes to risk during uncertain times, having the right ‘risk mindset’ and the right behaviours at board level is paramount. Boards and their risk committees need to operate with an adept and agile mindset, with resilience being a central focus. It’s crucial that a high level of trust is built between non-executives and executives (avoiding finger pointing and blame) but, equally, that this trust should not result in the blind acceptance of assertions and assumptions at face value. In fact, trust will result in better and more rigorous challenge of viewpoints, and it should enable better quality assurance for the board. If you’re not satisfied, keep asking. As one risk committee chair pointed out, the more you trust people, the harder the questions you willing to ask.
So, there is clearly a lot to think about when it comes to the work of the risk committee at a time of uncertainty. But, as my ten learning points shows, there is actually quite a lot you can do to help your committee run effectively and better support the board’s decision making.
What will you now do differently?
Hanif Barma is partner at Board Alchemy, which focuses on board effectiveness and improving the performance of risk and internal audit teams. He is also a co-founder of the Risk Coalition. The Risk Coalition’s Risk Committee Chairs Forum (RCCF) has been set up as a professional forum for risk committee chairs to exchange views and share experiences, network and learn from each other and from outside experts. The next RCCF event will be an online roundtable on at 8.30am to 9.30am on Thursday, 8 September 2022, discussing the topic: “How do you know your risk management arrangements are effective?”. You can book here for this event. (This is a Chatham House Rule event for risk and audit committee chairs only.)