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ACCA Strategic Professional · Strategic Business Leader · Managing, monitoring and mitigating risk

Tarnwell Energy's board reviews risk only once a year through a report prepared by the finance director. Following a major safety incident that was known to site managers but never escalated, an investigation finds that risks were recorded locally but not aggregated or reported upward. Which change would best address the root weakness in the risk management process?

The best change is a continuous process of identification, escalation and monitoring with clear risk ownership at every level and regular reporting to a board risk committee. The weakness was that known risks were not escalated, which insurance, longer annual reports or occasional consultancy reviews would not fix.

  1. AEstablish a continuous process of risk identification, escalation and monitoring with clear ownership at each level, reported regularly to a board risk committeeCorrect
  2. BIncrease the amount of insurance cover held against safety incidents
  3. CAsk the finance director to prepare a longer annual risk report
  4. DOutsource all risk identification to an external consultancy once every three years

Explanation

The failure was in communication and monitoring: risks known locally were not escalated. Risk management should be an ongoing process embedded across the organisation with defined ownership and reporting lines. Insurance addresses financial consequences only, a longer annual report keeps the same periodic weakness, and infrequent outsourcing does not embed ownership.

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