Sometimes it’s hard to know when to report risks to your board. Major corporations will typically include within their proxy statements promises that senior management will frequently update the board about risks. Some companies — including Staples, American Express, Alliance Data Systems and SLM (the former Sallie Mae) — even touch on those policies in their filings.
Yet many companies don’t have formal protocols, or predetermined triggers for reporting — or “escalating” — risks to the board.
Leaving it up to managers to escalate risks to the board isn’t necessarily a bad thing, say directors and risk management professionals. It does, however, require board directors to instruct executives clearly about the kind of risks about which they expect to be notified.
As boards of directors become increasingly interested and involved in enterprise risk management, it’s important you have the tools necessary to present risks in a concise and effective manner. This will enable better decision making at the top, as well as solidify your seat at the table among leadership — ensuring success for your organization and your career.
How to Present Risks to Your Board
Here are three tips for presenting risk to your board of directors and how the right risk management technology can help:
Highlight how risks are interrelated
Risks don’t stand alone, and neither should risk data. You need to make clear to the board how one risk affects the next so all parties can adequately problem solve — rather than create even bigger risks that might result from operating in silos. However, this is tough to do if all your critical risk information is locked away in disparate spreadsheets or different departments.
Risk management technology exists so organizations can consolidate risk and insurance data from across the enterprise; surface relevant information from wherever it’s hiding; connect it with other internal and external data; and then normalize the data so it’s all relatable. With the right functionality, integrated risk management technology can exploit its deep connection to expansive risk and insurance data and automatically create real-time visuals that take into account the full spectrum of risk.
Show what’s working…and what’s not
Equally important to showing how risks are interrelated is the ability to show how risk mitigation programs are performing. This can help the board to prioritize spending on mitigation efforts; understand the actual return on such investments; and even realize the value you bring to the organization by creating programs and offering tangible insight into what is working and what is not.
Not only does risk management technology provide eye-catching data visualizations — in the form of dashboards, charts and graphs — to help illustrate program effectiveness, but it allows for the automatic benchmarking of both internal and external claims in real time. This allows you and the board members to determine which programs are making an impact and deserve further attention, as well as how your organization’s claims (i.e. workers’ compensation claims) stack up against others.
Talk with the board, not at the board
The best presentations are conversations. If you want to make an impact in the boardroom, you need to engage board members in conversation — not just spout off facts about key risks or your overall risk program. That means if board members have questions, you should have answers…and on the spot.
Risk management technology can make visualizing data dynamic — allowing users to instantly (and easily) manipulate images and drill deeper with more specific queries for any type of information. The data visualizations are comprehensive and up-to-date; have many layers; and are easy to produce on the fly and in the moment. These capabilities are vital when presenting risk to board level stakeholders. Risk management technology takes the myriad data and turns it into actionable priorities. This is extremely helpful when trying to convey a meaningful story to the board.
Out-of-date tools equal inadequate analysis
If you don’t have the right tools, presenting to the board can be a real challenge. Frankly, the spreadsheets and presentation software that many organizations continue to use cannot meet today’s demands. Rudimentary exhibits for boards and executive management do not enable effective discussion or understanding of risks and risk relationships.
These non-technical tools do not aggregate the cumulative cost of risks and interdependencies of risks, nor do they have the ability to drill-down on objects and show additional, related information as needed.
When presenting to your board of directors, expectations are high and effective communication is critical. With typically a very short presentation time available, you need to be able to provide a convincing and clear picture of the significant risks to your company’s objectives. Risk management technology can clearly highlight the interrelationships of the risks that are impacting your organization, show mitigation activities for key risks and facilitate meaningful conversation between you and the board.
“The reason there isn’t any standard is because it doesn’t make sense to have a pick list. The organization has to decide which drivers are relevant to them,” says Russell McGuire, director of enterprise risk services at risk consulting and software firm Riskonnect.