Risk Management the Key Boardroom Disruptor
While board members in risk management roles may be thinking of how to recover from mishaps or ensure similar situations don’t erupt in the future, these directors should turn their attention to preventive measures, according to Board Agenda. (Jan. 4, Fitzsimmons) The true, long-term risks to corporate reputation and profits may be within the board itself, and directors have to be ready to find them.
For instance, when boards shy away from appointing new members with different skills or backgrounds, they may be blinding themselves to an awareness that will protect the organization from unforeseen dangers in the future. In the short term, the board will hear a chorus of similar, comforting opinions, but there may be risk around the corner.
Danger to a company’s bottom line can take many forms. For instance, when an organization’s culture encourages intentionally misleading performance indicators that will protect executives’ feelings (or bonuses), the situation may worsen quickly as the chosen measures stay strong – but the firm’s fundamentals get worse.
The short-term comfort of the board or other executives can be one of the greatest risks to an organization. Harsh truth in the short-term is a reputational protection method that lasts.
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