The DCRO Institute

To thrive in the long run, boards and executives must learn to embrace risk – to think and talk about risk in strategic ways, approach it with a fresh perspective, and take risk more confidently. Whether we are considering the launch of start-ups, product initiatives, new hires, expansion into foreign markets, decisions about investment, or new suppliers, businesses must take risks to create value and advance beyond the status quo.

The challenge: many board directors overly associate risk with the potential for loss. In the current environment of geopolitical, technological, environmental, health, and economic turmoil, the draw to this focus is natural. However, this perception of risk as loss brings unhelpful biases into the decision- making process, causing boards to miss out on the benefits that a positive governance of risk-taking can yield.

The good news: there are several things you can do today as a fiduciary to embrace risk throughout your organization and discover untapped competitive advantage.

The Directors and Chief Risk Officers ("the DCRO"), a group of board members and other C-level executives from more than 120 countries, crafted guiding principles to help boards get better at risk-taking. The recommendations offer a roadmap to help organizations establish or advance the work of several board committees whose work touches on the governance of risk-taking:

The Guiding  Principles for Board Risk Committees provides a guide to the best process for conducting the business of a board risk committee.

 The Guiding  Principles for Compensation Committees details practical guidance for governing the incentives and compensation that drive behaviors to be consistent with board- established "morals" and how to integrate that committee’s work with the work of the board risk committee.

The Guiding  Principles for Cyber Risk Governance details the work of various board committees on an overall cyber risk governance approach to protecting the organization's digital "Crown Jewels."

Boards can use these guiding principles documents as specific checkpoints, in annual review cycles, or as benchmarks for informational awareness and information gathering. They help them to assess current processes and then to move to better ones.