What role does the board of directors play in risk management?

The board of directors plays a crucial role in establishing the risk management framework and setting the overall vision for how an organization addresses risk. By approving risk policies, the board ensures that there is a strategic direction for risk management that aligns with the organization's goals and objectives. This involvement is essential because it establishes a tone at the top regarding the importance of risk management within the organization.

Setting the risk management vision involves defining the organization's risk appetite and guiding principles for managing risk, which are vital for informed decision-making. The board's approval of risk policies further reinforces the commitment to risk management across the organization and provides a mandate for identifying, assessing, and mitigating risks effectively. This high-level involvement is necessary for fostering a culture of risk awareness and ensuring that risk management practices are integrated into the decision-making processes at all levels of the organization.