The Crucial Role of Risk and Compliance Expertise on Boards - Nancy Capistran
Having the capability to assess risk and tackle a crisis is vital, especially in today’s turbulent business landscape. Board directors who effectively lead an organization and plan for its future have invested in fostering risk and compliance expertise. From cybersecurity threats to reputation risks or regulatory changes, Boards must be able to competently provide strategic guidance and effective oversight on critical issues.
More than ever before, businesses operate in an environment of heightened risk and scrutiny. They must adapt to technological changes, changing regulations, and volatile economic or geopolitical situations while facing increased scrutiny from the public eye. To navigate through these issues, Boards need members who can assess and help mitigate risks across various domains.
When Boards have Directors with extensive knowledge of risk and compliance across various sectors, they gain reliable experts capable of addressing emerging issues and proactively identifying and mitigating potential risks. This expertise ensures that stakeholder goals are consistently prioritized and safeguarded.
Directors with backgrounds in risk and compliance are adept at asking the right questions and identifying blind spots in risk oversight. Their expertise enables them to effectively scrutinize potential vulnerabilities and ensure comprehensive risk management. When it’s time to take action, they bring a valuable perspective that positions the Board to make more strategic plans and better-informed decisions. On top of their ability to guide an organization through a crisis, they know how to shape and oversee company-wide compliance frameworks and policies, ensuring the corporate structure is holistically risk-aware. Plus, demonstrating strong risk governance expertise is known to boost shareholder and regulatory confidence outside of the boardroom!
Of course, risk and compliance have many different specifications that vary by industry — enterprise or financial risk management, regulatory compliance, legal and ethical risks, and ESG and sustainability risks are some of the most common. Having a mix of Directors with collective expertise over the critical areas for your business is ideal.
As someone with experience in Risk, Compliance, and Crisis Management, I’ve seen firsthand the kind of impact that having risk and compliance expertise has on a business’s ability to quickly and confidently navigate the economic, cultural, and regulatory landscape. Integrating risk discussions into a Board’s broader strategic conversations and balancing them with other critical responsibilities makes them more prepared to tackle current and future risks or compliance issues.
To ensure Boards possess the necessary expertise in risk and compliance, it is essential to prioritize these skills during recruitment, ideally seeking a diverse range of risk experiences. Larger Boards should consider establishing dedicated risk and compliance committees that regularly conduct in-depth risk assessments, address gaps in corporate policy, and offer ongoing risk training opportunities to the entire Board. This approach not only strengthens risk oversight; it also aligns with stakeholder interests by fostering a culture of proactive risk management and enhancing the Board’s ability to navigate complex challenges effectively.
Having strong risk and compliance expertise is a necessity in this increasingly complex and uncertain era. By prioritizing risk experience in recruitment and integrating risk management into the broader strategic framework, Boards can enhance organizational resilience and improve decision-making. This approach not only fortifies the organization against potential challenges but also positions it for enduring, long-term success. Boards that incorporate risk and compliance expertise are best equipped to navigate future challenges and seize the right opportunities, ensuring sustained growth and stability.
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