For years, boards have grappled with how to address very low probability, very high impact risk scenarios. A simple arithmetical extraction from a risk matrix can leave the impression of overspending on a remote contingency when it does not materialize, and woeful lack of preparation and mitigation when it does. The effect of the COVID-19 pandemic on business has underlined this acute dichotomy – some businesses had a reference to pandemics in their risk register, others did not, but could point to vaguer formulations, which gave them some declaratory cover. How many businesses had genuinely prepared for a once-in-a-century disruption on the scale we have seen?
Looking forward, how should boards and executive teams think about external risk? Can arithmetical extrapolations of probability against impact be used to allocate resource to mitigating risk? In the UK, the FRC’s Governance Code requires a robust assessment of the company’s principal risks. However, how can a board assess the risk that an extraneous event will cause the government to shut down large parts of the economy? How useful is the concept of risk appetite for assessing macro risks? Should a company’s risk register focus on the risks for which the company can effectively mitigate the impact or affect the incidence? How useful in assessing a company as a going concern are references in risk registers to pandemics, elections, etc.?
Tony Reed, EMEA Chair of the global Corporate Practice, will introduce you to the speakers and Matthew Kirk, International Affairs Advisor, will host the discussion.
Our panelists are:
- Nell Cady-Kruse, Non-executive Director, Barclays US LLC and Barclays Bank Delaware
- Thomas Tyler, Global Head of Sales, ELITE, London Stock Exchange
- Louise Barber, Legal Director, Squire Patton Boggs
Questions will be invited from the audience before and during this discussion.