Risk governance, as defined by NIST, is the “process by which risk management evaluation, decisions, and actions are connected to enterprise strategy and objectives. It provides the transparency, responsibility, and accountability that enables managers to acceptably manage risk.” While this concept is seemingly straightforward, a robust risk governance program has a lot of varied components! Below is a breakdown of the areas that comprise risk governance.
- Framework and Principles: Effective risk governance starts with creating a well-defined framework that outlines how the organization will approach and handle risk. This involves establishing guiding principles and policies to steer risk management activities.
- Roles and Responsibilities: Responsibilities and accountabilities must be clearly assigned. This typically means designating specific risk-related tasks across various levels and functions. For example, this might include establishing a risk oversight committee, dedicated risk officers, or a vendor management team.
- Risk Identification and Assessment: A fundamental element of risk governance is the systematic process of spotting, evaluating, and ranking risks. These may include operational, financial, compliance, strategic, or other categories of risk.
- Risk Mitigation Strategies: After risks have been evaluated and prioritized, the organization should craft and apply strategies to reduce or control them. Examples include diversifying investments, refining operational workflows, enhancing security controls, or ensuring adherence to legal and regulatory standards.
- Monitoring and Reporting: Ongoing oversight of risk management efforts is essential. This requires consistent reporting on risk levels, the success of mitigation measures, and adherence to the established framework.
- Culture and Communication: Risk governance also depends on building a culture that values risk awareness. Every employee should understand the significance of risk management and their role within it. Clear communication and regular training are crucial elements.
- Review and Adaptation: Finally, robust risk governance demands routine evaluation of the framework and strategies to adjust for new developments—such as regulatory changes, shifts in the marketplace, or advancements in technology.
Before we can dive into what risk governance really means and how to adopt it into your organization, we must first look at how this fits into the overarching GRC program.
Risk Governance as a Part of the Governance, Risk, & Compliance (GRC) Program
A governance, risk, and compliance (GRC) program is an integrated framework that helps organizations align their operations with business objectives, manage risks effectively, and ensure compliance with industry and government regulations. It achieves this by combining corporate governance, enterprise risk management (ERM), and regulatory compliance into a unified system to improve decision-making, reduce inefficiencies, and enhance organizational resilience. Risk governance is a core component within the greater Governance, Risk, and Compliance framework.
While risk governance focuses on the systematic process of how risks are managed and integrated into decision-making to achieve organizational goals, GRC is the overarching strategy that integrates governance, risk management, and compliance into a unified approach. Below is a more granular breakdown of the three components of GRC:
- Governance: Establishes the framework for decision-making and accountability within the organization, ensuring operations are aligned with strategic goals.
- Risk Management: Involves identifying, assessing, prioritizing, and mitigating potential risks and threats that could impact the organization’s objectives.
- Compliance: Focuses on adhering to relevant external laws, regulations, and industry standards, as well as internal policies.
As you can see from the subcategories above, risk governance applies to both the “governance” and “risk management” aspects and already has a lot to address. So when the board of directors nonchalantly tells their Head of Information Security to “quickly implement a GRC program”, this is no small lift! The Head of InfoSec will first want to focus on risk governance before tackling some of the other GRC components.
Risk Governance Versus Risk Management
Risk governance sets the strategic framework, structure, policies, and accountability for how an organization handles risk, while risk management is the process of identifying, assessing, mitigating, and monitoring risks to align with that framework and achieve strategic goals. In simple terms, you can think of risk governance as the Company’s guidelines and expectations for addressing risk, and risk management as the execution of processes and controls to meet these guidelines and expectations.
For example, risk governance might involve approving a cybersecurity policy that sets a goal of zero data breaches, while risk management focuses on implementing and maintaining technical controls, such as firewalls and employee training, to prevent and detect breaches. Although you will need both components to achieve a strong security posture, you must begin with risk governance to create the guidelines for managing risk within the Company.
Risk Governance Roles, Responsibilities, & Oversight
So let’s get down to it. Where should you begin when establishing risk governance within an organization? The first steps involve defining organizational expectations, clarifying roles and responsibilities, setting up the appropriate oversight bodies, and formalizing risk-related documentation. The subsections covered below are some of the foundational risk governance items that should be performed.
Define the Risk Appetite
This defines the level and types of risk the organization is willing to accept in pursuit of its objectives. It provides clear boundaries for risk-taking and decision-making across all departments. The board of directors and executive leadership should collaborate to formally define and approve the organization’s risk appetite and then communicate it across all functions.
Document a Risk Charter
The risk charter is a formal document that outlines the purpose, scope, and authority of the organization’s risk governance program. It sets the framework for risk management activities, defines the roles of key stakeholders, and specifies how risks will be identified, assessed, monitored, and reported. The board of directors and executive leadership should draft, review, and adopt a comprehensive risk charter and ensure it is updated, as needed, to maintain alignment with organizational changes.
Establish Risk Policies, Including Risk Ownership
The risk governance lead should establish policies that describe how risk should be managed within the organization and clearly assign duties to specific individuals, teams, or departments. These policies should relay to personnel their responsibilities in identifying, escalating, and mitigating risks. The risk governance lead, alongside other department leads, should create, revise, and approve these risk-related policies and ensure roles and responsibilities are communicated. At a minimum, the following policies related to addressing risk should be in place:
- Risk Assessment / Management Policy
- Third Party and Vendor Management Policy
- Disaster Recovery Policy
- Business Continuity Policy
- Information Security Policy or Access Control Policy
- Incident Response Policy
- Data Protection and Privacy Policy (if applicable)
- Code of Conduct
- Acceptable Use Policy
- Change Management Policy
Implement the Risk Committee & Meetings
The Risk Committee is a designated group of senior leaders and subject matter experts responsible for overseeing the risk governance process. The committee reviews major risks, evaluates mitigation strategies, monitors compliance with the risk framework, and provides guidance to the board and executive team. The risk governance lead should establish the risk committee, incorporate relevant department leads, implement recurring meetings, and mandate follow-up for identified risks.
Select a Risk Framework
There are many structured methodologies available (COSO ERM, ISO 31000, NIST CSF, etc.) that outline processes, controls, and best practices for managing risk. Management should evaluate the available risk frameworks, select the one most appropriate for the organization’s size and industry, and implement it company-wide by integrating its processes into planning, operations, and reporting.
While the full extent of risk governance activities is certainly larger than the requirements noted above, these are some of the more essential components to consider when kickstarting your risk program.
Implementing Risk Management Processes & Controls
Once the guidance and oversight aspects of the risk governance program are firmly in place, at a minimum, management should consider implementing the following risk management process and controls. These measures provide assurance that company-wide risks are being proactively identified, monitored, and mitigated.
Create & Maintain a Risk Register
This is a centralized record of all identified risks, including their descriptions, likelihood, potential impact, and assigned owners. A risk register acts as the foundation for risk management and provides visibility into the organization’s risk landscape, ensures accountability, and serves as a reference point for decision-making and reporting to executives or the board.
Perform a Comprehensive Risk Assessment
Companies should perform a risk assessment at least annually to identify key risks across all departments and business processes as of a point-in-time. Similar to the risk register, this should include an assessment of the likelihood and impact of each risk. Regular risk assessments enable leadership to understand where vulnerabilities lie and to allocate resources to the most critical threats, reducing potential financial, operational, or reputational harm.
Conduct Third-Party & Vendor Risk Assessments (Including SOC Report Reviews)
As part of the onboarding process, management should evaluate all prospective vendors and partners for security, compliance, and operational reliability. For critical vendors and subservice organizations, it is considered industry best practice to also conduct annual risk assessments. Third parties often represent a significant source of risk. Assessing vendor controls ensures they meet your security and compliance standards, reducing exposure to supply chain breaches or regulatory violations.
Execute a Disaster Recovery & Business Continuity Plan (DRP/BCP) Test
These tests include a simulation of disruptive events such as system outages, cyberattacks, or natural disasters and/or a verification of backup integrity, recovery time objectives (RTOs), and recovery point objectives (RPOs). Testing the DR and BC plans confirms the organization’s ability to quickly recover operations and minimize downtime. The lack of testing creates the risk that the plans fail under real-world conditions, leading to costly delays or service interruptions.
Execute an Incident Response Test
An IRP test should simulate security incidents (e.g., ransomware, phishing, insider threats) to test detection, escalation, and containment procedures. It should also be used to determine if incident participant roles and responsibilities and communication channels have been adequately conveyed. An IR test ensures that your organization can respond swiftly and effectively to cybersecurity or operational incidents.
Establish Trainings that Promote Risk Best Practice
Management should issue regular training sessions that guide personnel on how to address different types of risk. For example, this could be captured as part of an annual security awareness, HIPAA, data privacy, or GDPR training. Implementing these types of training cultivates a risk-aware culture and empowers staff to identify and report potential issues early.
While these measures do not represent every possible risk management process or control a company should adopt to ensure a fully mature risk governance program, they represent some of the most critical components for building a strong foundation. Implementing these key practices enables an organization to systematically identify, evaluate, and address risks across the enterprise, setting the stage for more advanced risk management strategies and continuous improvement over time.
Building Your Risk Governance Foundation
In summary, risk governance serves as the strategic backbone of an organization’s broader GRC program, linking risk evaluation, decision-making, and actions directly to enterprise objectives. By establishing a clear framework, defining roles and responsibilities, and selecting appropriate policies and frameworks, organizations can build a strong foundation for risk oversight. Implementing foundational processes, such as risk assessments, vendor evaluations, disaster recovery and incident response tests, and security training, further reinforces a culture of accountability and resilience. While these practices do not represent every potential element of a mature risk governance program, they form the essential building blocks for proactively identifying, monitoring, and mitigating risks. Together, these efforts ensure that risk management becomes an integral part of the company’s strategic planning and long-term success.
Ready to strengthen your organization’s risk governance program? Linford & Co’s experienced team can help you establish robust risk frameworks, conduct comprehensive assessments, and build the foundation for effective GRC implementation. Contact us today to discuss how we can support your risk management objectives
Helen has 10 years of experience in audit, cybersecurity, and data privacy and has worked in public accounting as well as industry. She started out her career at Deloitte managing audit readiness assessments, Sarbanes-Oxley 404 audits, and SOC 1 & 2 audits. More recently she worked as a Director of Cybersecurity Compliance at an Ed-tech start-up, Guild, and specialized in building out and maturing their audit, risk, and partner support programs. Between 2015 and 2023, Helen sat on the ISACA Denver chapter board of directors and taught CISA prep courses. She is a certified information systems auditor (CISA), a certified information privacy technologist (CIPT), and a certified risk & information systems control (CRISC) professional.