In a world shaped by rapid technological change, geopolitical tensions, and growing expectations from investors, employees, and customers, boards need to pay close attention to how they oversee risks. Among other things, non-executive directors bring an independent and experienced perspective that helps the board identify and assess risks more clearly. This supports better decisions and ensures that risks are managed in line with the company’s long-term goals. Here are some practical tips to help boards strengthen their role in overseeing risks.
Risk management 101 for NEDs
Let’s start with a refresher:
- What is risk oversight?
Risk oversight is how the board makes sure that risks are identified, managed, and monitored. It includes looking at both financial risks, like losses and costs, and non-financial risks, like damage to the company’s reputation or how well people work together.
- What is financial risk?
Financial risks come from risks in areas like credit, liquidity, market, and funding. These risks directly affect how the company earns money, pays its debts, and funds its operations.
- What is non-financial risk?
Non-financial risks come from things that are not purely financial in nature, like issues with culture, reputation, compliance, conduct, operations, or technology. These risks can still lead to financial losses, but their sources are different and may be harder to measure or track.
- Risk oversight and board responsibilities
Risk oversight is about how the board sets the tone and expectations for how risks are seen, discussed, and managed. This means encouraging open and honest conversations, supporting clear roles and responsibilities, and making sure that risk awareness is part of how the company works every day.
For many boards, it can feel like a balancing act. If there is too little challenge, important issues can be missed. If there is too much challenge, it can limit innovation and interfere with operational management. Good risk oversight means shaping a culture where people can share concerns and where decisions reflect what matters most for the company’s future.
Top 5 tips for non-executive directors
To take your risk management impact up a level, here are 5 tips
Tip 1. Prioritise culture over checklists
The board plays an important role in setting the culture for how risks are identified and managed. This includes asking thoughtful questions, encouraging open dialogue, and showing that transparency and accountability matter. Boards should create an environment where people feel safe to share concerns and where risks are seen as part of good decision-making. When concerns are not raised or conversations are not detailed, it can show that people do not feel safe to speak up or that there is confusion about what level of risk is acceptable. Boards should watch for these signals and take steps to build a culture that supports openness and learning.
Tip 2. Clarify risk appetite and strategy alignment
Boards should make sure there is a clear understanding of how much risk the company is prepared to take to meet its goals. This means checking regularly that the risks the company takes fit with its purpose and plans for growth.
Tip 3. Focus on the material, not just the measurable
Boards should look beyond the numbers. While data is important, it can miss things like damage to the company’s reputation or problems with culture. Boards should ask for insights on these types of risks and look for early signs of uncertainty that could affect the business.
Tip 4. Clarify roles and responsibilities
Boards should make sure everyone knows who is responsible for managing risks, who oversees them, and who checks that controls are working. This helps avoid confusion and makes sure there is independent review and challenge when needed.
Tip 5. Engage in scenario planning and stress testing
Preparing for future challenges includes thinking about what could go wrong. Boards should support scenario planning and stress testing for risks that could have a big impact. This helps avoid confusion and ensures there is independent review and challenge when needed.
Conclusion
Non-executive directors play a key role in how risks are seen and managed. By focusing on these practical tips and supporting a culture of open discussion, clear roles, and informed decisions, boards can strengthen their oversight role and help the company face challenges with confidence.
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About the author: Julien Haye
Managing Director of Aevitium LTD and former Chief Risk Officer with over 26 years of experience in global financial services and non-profit organisations. Known for his pragmatic, people-first approach, Julien specialises in transforming risk and compliance into strategic enablers. He is the author of The Risk Within: Cultivating Psychological Safety for Strategic Decision-Making and hosts the RiskMasters podcast, where he shares insights from risk leaders and change makers. Julien is a member of NEDonBoard.
