The Financial Reporting Council's latest guidance on the reporting of important risks has now been published. In a nutshell, boards are required to report 'principal risks' that have their origins in 'behaviour or organisation', what we call behavioural and organisational risks. This new recommendation effectively recognises our conclusion, that there is a hole in the 'Three Lines of Defence' doctrine that underlies most current risk analysis and reporting.
Behavioural and organisational risks are important causes of
reputational damage and of many better-recognised risks. However, boards
cannot properly report on 'principal risks' until they have
systematically identified and evaluated both the range of behavioural
and organisational risks at work in the company and the extent to which
they may give rise to principal risks including reputational hazard.
We have written about the practical implications for boards, chairmen and company secretaries, for Governance, the authoritative publication on international corporate governance.
You can find our article here.
- Reputability are thought leaders in the field of reputational risk and its root causes, behavioural risk and organisational risk. Our book 'Rethinking Reputational Risk' received excellent reviews: see www.rethinkingreputationalrisk.com. Anthony Fitzsimmons, one of its authors, is an authority and accomplished speaker on reputational risks and their drivers. Reputability helps business leaders to find these widespread but hidden risks that regularly cause reputational disasters. We also teach leaders and risk teams about these risks. Here are our thoughts, and the thoughts of our guest bloggers, on some recent stories which have captured our attention. We are always interested to know what you think too.