In the latest Risk Intel Podcast episode, host Ed Vincent is joined by Michael Glotz, Co-founder and CEO of SRA Consulting, to discuss the importance and implementation of risk committee charters. The main points Glotz communicates in this episode is (1) what is the role of the risk committee, (2) does the organization have the right Chief Risk Officer and risk staff in place, and (3) is the risk committee effective in its role, which can be evaluated by conducting an annual self-assessment. Below is a summary of these main topics discussed throughout this episode.
Glotz shares valuable insights on the authorship of the risk committee charter. Typically drafted by the Chairman, Chief Counsel, or Chief Risk Officer, shockingly, more than half of the organizations surveyed during board assessments by SRA lacked a charter. The key takeaway: if it doesn't exist, create one right away. It's a crucial roadmap for effective risk management and can be as simple as a few pages.
While the charter is designed to "live forever," Glotz advocates for an annual review. Far from a mere formality, this annual "check-up" ensures the charter evolves with the change risk landscape and organizational dynamics, embodying a commitment to good governance. Add this to your calendar as an annual reminder to formally review your charter each year, so you don't forget.
The heart of the risk committee charter lies in its substance. Glotz stresses the need for clarity on the committee's responsibilities, including periodic reporting to the full board. Key elements encompass:
The charter also extends its reach to overseeing the Chief Risk Officer and conducting an annual self-assessment.
Efficiency takes center stage in the discussion. Glotz suggests a practical approach – the agenda for both management and board risk committees can be relatively similar. While the latter may delve deeper, maintaining a consistent agenda streamlines preparation and presentation, maximizing efficiency for organizations seeking to optimize their risk management processes.
The risk committee charter isn't just an internal document; it's a roadmap for governance. Regulators may scrutinize this artifact to ensure a clear purpose and effective governance. A well-crafted and regularly reviewed charter becomes a powerful tool in showcasing an organization's commitment to robust risk management.
As we conclude this episode, it's evident that a well-crafted risk committee charter is more than documentation – it's a strategic tool. From authorship to annual reviews, key elements, and efficiency practices, the charter plays a pivotal role in navigating the intricate landscape of risks. Organizations are encouraged to leverage these insights, ensuring their risk committee charters are not mere paperwork but powerful instruments for effective risk management.
Stay tuned for upcoming Risk Intel Podcasts, where we continue peeling back the layers of risk management, offering practical insights from industry experts.