Board-level Commitment to ERM is Growing

This week, results from the 2010 Global Enterprise Risk Management Survey were released by Aon and they indicate a growing level of maturity in ERM programs.  In addition, as the program maturity levels increase, board members are becoming increasingly involved in the effort.  Here is a summary of the board-level indicators from the survey results.

Board-level commitment to an enterprise risk management initiative is absolutely critical to achieving the highest value from ERM efforts and investment. Not only does board buy-in establish priorities and sanction resource allocation, it is a key factor in establishing and maintaining an appropriate risk culture and embedding ERM throughout the chain of command. Best-practice organizations ensure that boards and management have defined risk management responsibilities and delegations of authority.

Responsibility for risk management, including internal and external reporting of risk, should be embedded into the organization’s governance structures and discussions, with emphasis at the board level on:„„

1. Confirming the organization’s risk management objectives and strategies.


2. „„Approving the organization’s risk appetite and tolerances.


3. „„Confirming the organization’s risk profile and approving management’s approach for responding to the most critical enterprise-level risks.


4. „Overseeing the organization’s risk governance framework and ensuring that risk management roles, responsibilities and expectations are defined at the senior management level.

Boards that are successful at ERM have established approaches for managing the workload associated with risk governance — including setting expectations for the quality and timeliness of risk reporting from management. When a board is mired in details regarding risk and risk management, decision making can be slow and ineffective. Best-practice boards are able to find an appropriate balance between oversight of risk and risk management (through effective dialogue with and delegation to management) and the board’s practical use of risk information to enhance decision making.

The balance of responsibility between board and management is a crucial element in any successful ERM program.  If your company or board is struggling to achieve this balance, Wheelhouse Advisors can help.  To learn more, visit www.WheelhouseAdvisors.com.