What does effective board-level risk oversight look like today? What does effective board-level risk oversight look like today? What does effective board-level risk oversight look like today?

Today’s businesses navigate a complex and rapidly changing environment. Macroeconomic uncertainty, climate change, geopolitical turbulence, and accelerated technological evolution are creating extraordinary challenges for organizations and their boards of directors. On top of these uncertainties, the recent global pandemic and the resulting emergency measures taken by various governments have been causing unprecedented business disruption. In these turbulent times, robust board leadership is more important than ever. As part of their oversight duties, boards are responsible for making sure their organizations have put in place the necessary risk management framework and policies to deal with the consequences of unforeseen events.

In order to have a clearer view on board practices and how the board’s role in overseeing risk has evolved in recent times, KPMG and Vlerick Business School joined forces to shed light on how board directors perform their risk oversight duties and to learn from the successes and challenges they face in the pursuit of sustainable value creation. This study combines extensive practitioner experience with solid academic rigor and provides a unique insider look into the boardroom.

There is no one-size-fits-all approach to board-level risk oversight. The differences in board practices reflect the nature, scale, and complexity of the organization’s activities, as well as the ownership structure and the board’s vision on risk-taking. The differences are also a reflection of the differing regulatory environments under which companies operate - e.g. financial services and listed companies tend to have more robust board-level risk oversight practices. The principles highlighted in the report are relevant to both large and smaller organizations, listed as well as privately owned companies, across a wide range of industries.

• Board-level risk oversight is on the rise: There is an increased general recognition of the critical importance of board-level risk oversight, beyond compliance.
• Professional risk oversight and entrepreneurship go hand in hand: There is a growing appreciation that, when implemented properly, formal risk oversight strengthens rather than impedes entrepreneurial activity.
• Effective risk oversight requires the right structure and processes: Essential governance design choices relate to the risk governance structure, formal risk oversight process, and risk reporting to the board.
• Culture is king: Board risk oversight relies on creating the right culture to help create risk awareness and to guide appropriate risk taking at all levels in the organization.
• Integrating risk and strategy (including ESG) in board-level decision making is key: There is still some work to be done to integrate strategy and risk effectively at board level, both in terms of embedding risk in strategic decision-making and setting the desired risk appetite in line with stakeholder expectations.

KPMG and Vlerick Business School joined forces to perform a first-of-its-kind study in Belgium based on interviews with 20 top board directors and chairpersons in Belgium. Download the full paper below and reach out our experts for a further conversation on the topic.