Key Insights Blog

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19 January 2017

Risks Management: The  IoD’s New Directors Competency Framework

The Institute of Directors recently released their new ‘Director’s Competency Framework’. The framework is the latest effort by the IoD to define the competencies required by Directors and the knowledge, skills and mindset they need in order to be effective.

From a Risk Management practitioner’s perspective it is interesting to note that risk and the management of risk is mentioned several times in the framework. The framework defines an understanding of good corporate governance as a core competency required by Directors and this is first the area that risk management is mentioned.

The corporate governance section of the framework covers risk management is highlighted in key sections.

Risk Oversight:

  • Risk appetite and the role of growth and value creation.
  • The structures and systems which enable your organisation to effectively identify, assess and manage risks. 

Firstly, it is essential for directors to set the “tone from the top” and the IoD recognises this as a core requirement. Secondly, it is important to develop the structure and systems necessary for effective risk management. 

Strategic Thinking

  • Opportunities and threats: Identify opportunities and threats to the organisation, combine the internal and external business environment.
  • Considering the impact of decision: Identify the potential impact of decisions and offer contingency plans and risk mitigation. Strategic direction is a core competency for any director and is key in decision making. The implication here is that the assessment and evaluation of risk in the context of strategic direction is a core competency for any Director. 

Decision Making:

  • Taking appropriate risks: Take calculated risks in the context of the organisation’s strategy and the appetite of the board. 

What is encouraging about this final statement is that it clearly highlights the value that can be derived from managing risk effectively .

I have personally been involved in the IoD for several years now and have completed their Chartered Director qualification. Whilst I found this to be of value to me personally it could definitely be argued that the qualification is a little inaccessible and is primarily geared towards those taking the IoD’s formal training. The Director’s Competency Framework is much more accessible and that can only be a good thing. It is also great to see that it puts good risk management out there as a critical skill that all Directors need to have. 


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