Board of Directors Oversight of Leadership Risk

Fig.1 “Risk Hot Spots”

Source: The European Financial Review.

The practice of Enterprise Risk Management [ERM] was born as a consequence of the Enron collapse in 2001…

Leadership is an organization’s most central risk
Rarely is leadership elevated to the level of a risk “hot topic” in the minds of Boards or their primary committees… Figure 1, Risk Hot Spots, adapted from KPMG presents the broad scope of risk factors which most every enterprise faces today. It is a well-conceived, comprehensive taxonomy of risk. Yet, we have added leadership as the centerpiece of the model because every strategic and tactical decision formulated and implemented within the enterprise relies on leaders who recognize opportunity or threat and mitigate strategic and implementation risks. We suggest that leadership dwarfs all other factors in determining organizational performance and long-term survivability. It is decisive in creating a market leader or market laggard. And, it is a clearly a topic which has largely been overlooked by Boards.