Financial Education

Risk governance is a term for specific processes put in place for the purpose of risk management. Risk governance requires senior management to make choices regarding the governance structure, infrastructure needs, reporting requirements and methodology.

A centralized governance structure has the advantage of economies of scale and allows management to consider whether the risks of various business units offset (diversify) each other.

A decentralized governance structure, by contrast, puts risk management in the hands of those most familiar with the specific risks.

Many firms are now adopting more centralized approaches due to the advantages noted above, and also to have more oversight of the risk management process.

For more information, see all articles on: Governance, Portfolio Management, Risk Management

See also:

Does Employee Ownership Hurt Stock Returns?

Enterprise Risk Management

Dividend Policy, Shareholder Rights and Corporate Governance

Research Digest: Company Officers as Pension Trustees – Who are they Working For?

Extensions and Supplements to Value at Risk (VaR)