ABSTRACT
Behavioural biases and incentive conflicts are powerful forces that help explain why so many organisations struggle to manage risk effectively. Regulation has gone some way to tempering these forces, but arguably it is not sufficient on its own. Risk governance, the system of rules and relationships in an organisation that support decisions and oversight relating to risk is a potential solution to these problems.
This chapter examines the formal structural elements that are useful for effective risk governance, such as board committees, specialist risk functions, and the like. It will explain what is known in the academic literature about the efficacy of these structures, and it will also discuss some of the challenges that have emerged in the implementation.
The chapter also defines what is meant by risk and risk management.
