Guest Post by Ronald Kral, MBA, CPA, CMA
Managing Partner of Candela Solutions LLC
Sound data, information and intelligence are clearly critical business success factors; however, is it getting to the right people? Too often we think of C-level decision makers as the ultimate end-user. Yes, they are collectively the company’s brain-trust and are directly responsible for executing strategy, but whom should be monitoring and why? The answer is the board of directors, who serves to protect and represent the interests of shareholders. The active engagement of directors needs to be the lynchpin of important corporate deliberation, which hinges on information. Now that we have the “who” and “why” identified, let discuss “how.”
First let’s be very clear on what “risk intelligence” entails. There are both macro and micro elements to this definition as used in this article. From a macro standpoint it involves the governance structure, and relating policies and procedures, to help ensure that decision making is undertaken in the best interest of shareholders. From a micro standpoint, the decision making process hinges on the timeliness, accuracy and comprehensiveness of information. This includes the supporting data elements and assumptions. Data transparency (i.e., knowing the origin and history of information, assumptions, ownership, biases and accuracy) is essential in making sound decisions. Finally, while “risk” is the possibility of an adverse event, “opportunity” is the possibility of a favorable event. These two potential outcomes are inseparable as every decision to create or protect shareholder value (i.e., opportunities) involves risk.
Read moreRisk Intelligence in the Boardroom: Take a Quick Test to Measure Your Company’s Maturity