What roles do management and the board typically play in addressing potential risks?

The chosen response highlights the distinct, yet complementary roles that management and the board play in risk management within an organization. Management is primarily responsible for assessing and managing risks on a day-to-day basis. This includes identifying, analyzing, and mitigating risks that can affect the organization's operations and strategic objectives. They are in the best position to understand the intricacies of the business environment and operational challenges, which enables them to implement appropriate risk management strategies effectively.

On the other hand, the board's role involves oversight and governance. The board evaluates the results of the risk management processes established by management and provides guidance and advice based on their own oversight. This separation of roles ensures that while management is focused on the operational side of risk, the board maintains a higher-level perspective necessary for ensuring that the organization's risk management practices align with its strategic goals and risk appetite.

This division of labor allows for a more robust risk management framework, where management implements the strategies and the board holds them accountable, ensuring that risks are effectively monitored and that the organization is prepared for potential challenges. This collaborative approach enhances the overall risk management strategy and supports the organization's resilience in an ever-changing environment.