What does risk governance primarily involve?

Risk governance primarily involves setting overall policies and standards. This process is crucial because it defines how an organization approaches risk management and establishes the framework within which risks are identified, assessed, mitigated, and monitored. Effective risk governance ensures that there is a clear set of guidelines and principles that align with the organization's strategic objectives, enabling a cohesive approach to managing risks across all levels and departments.

In risk governance, policies and standards lay the foundation for consistent risk assessment practices and establish roles and responsibilities for managing risks. This centralized governance is essential to ensure that all risks—financial, operational, reputational, and strategic—are considered and adequately managed, fostering a culture of risk awareness throughout the organization.

Monitoring individual business units focuses on the tactical oversight of specific areas of the organization rather than the broader governance framework, which encompasses the entire organization. Identifying all possible risks, while a fundamental component of risk management, does not capture the essence of governance itself; governance is more about the structure and processes. Lastly, limiting risk governance to only financial risks would neglect other significant risks an organization faces, thereby undermining its resilience and long-term success.