Blog – Non-executive directors, Risk management, Strategy

How non-executive directors can help companies navigate risk and uncertainty

Economic volatility, technological change and increasing competition: these are just some of the challenges that companies face today. To plot a safe course, businesses need strong leadership and a high-performing board of directors. Non-executive directors (NEDs) play a critical role in helping companies to mitigate risk and uncertainty and to build long-term success.

Risk and uncertainty concept: Fuzzy figure of man walking on hanging bridge disappearing into the distance in fog

Here are five of the strengths that underpin the role of NEDs in combating risk and uncertainty.

1. Diversified expertise and experience

NEDs bring a range of skills, expertise and experience to the board, and can provide a diverse perspective on risk and uncertainty. For example, a non-exec with experience in a particular industry or market can provide valuable insights into current trends and future opportunities. Similarly, a non-exec with a background in finance can help to assess financial risks and uncertainties. This diversified expertise and experience can help the board to make informed and more effective decisions.

2. Independent perspective on risk management

Because NEDs are typically not involved in the day-to-day operations of a company, they can offer an independent perspective and challenge assumptions. This can be particularly valuable when it comes to assessing and managing risk. For example, NEDs may be able to recognise risks that are not immediately apparent to other board members, or suggest alternative solutions to risk management challenges.

3. Monitoring and accountability

NEDs play an important role in monitoring a company’s performance. They can review its risk management policies and procedures, monitor its risk profile, and keep the board regularly updated on key risks and uncertainties. By providing independent oversight, NEDs can help to hold the company accountable for its risk management practices, and ensure that it is taking the necessary steps to navigate risk and uncertainty effectively.

4. Support for decision-making around risk and uncertainty

NEDs can support and guide the board in making decisions, particularly in times of uncertainty. They can help to evaluate options, assess risks and benefits, and provide a strategic perspective on key decisions. This can be particularly valuable in complex situations where there may be multiple risks and uncertainties, and where the board needs to make difficult decisions in a timely manner.

5. Building resilience

NEDs can help to build resilience into the company, enabling it to better navigate risk and uncertainty in the future. They can promote best practices in risk management, encourage the development of contingency plans, and help to build a culture of risk awareness and management within the company.

By taking a proactive approach to risk management, NEDs can help to ensure that the company is better equipped to navigate risk and uncertainty, and is better positioned for long-term success.

To enable NEDs to play their part in mitigating risk and uncertainty, companies must provide them with the resources and support they need, including:

  • regular training and education on risk management
  • access to relevant information
  • enough time and resources to carry out their responsibilities.

Companies should also be transparent about their efforts to manage risk and uncertainty, and report regularly on their progress in this area.

To learn more, contact me in confidence to arrange a no‑obligation discussion.