Why the whole board needs to be on top of risk management. (2016)
“Delegating risk oversight to committees is not enough.”
Thomas Keusch, INSEAD Assistant Professor of Accounting and Control
Insead Knowledge: Leadership and organisations, 24 Nov 2016
Drawing on his research paper ‘The influence of board of directors’ risk oversight on risk management maturity and firm risk-taking’, written with Wharton’s Christopher D. Ittner, Keusch comments that “the more involved a board is, the better.
“Greater risk oversight is associated with more mature risk management practices relating to risk identification and measurement, risk communication, accountability and risk culture. This, in turn, is associated with lower future risks, shown in the firms’ stock return volatility among other proxies.
“Importantly, lower firm risk doesn’t come at the expense of performance….”
“Overall, (our) findings demonstrate that although board directors are high-level stewards of a company with limited time, they can have a significant impact on the risk management processes of a firm. Committees are still important and should continue to play a role in risk oversight as long as the whole board is also involved.”
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