Which practice reflects the best approach for boards regarding risk reporting?

The best approach for boards regarding risk reporting involves management's reporting that encompasses the likelihood, severity, duration, and velocity of risks. This comprehensive reporting allows the board to gain a clear and nuanced understanding of risks facing the organization.

By analyzing the likelihood of risks, the board can prioritize which risks need immediate attention. Understanding severity helps in assessing the potential impact of those risks on the organization. Duration indicates how long the risks might persist, which is essential for strategic planning and risk mitigation efforts. Lastly, velocity refers to the speed at which risks can impact the organization, providing insights into urgent risks that may require swift action.

This holistic view not only aids in informed decision-making but also fosters effective communication between management and the board. The inclusion of these four dimensions allows for a richer discussion around risk management strategies, enabling boards to better fulfill their oversight responsibilities. Overall, this approach enhances the board’s ability to navigate the complexities of risk in a proactive and strategic manner.