Here’s a trio of excerpts from this 12-page report about risk oversight disclosure penned by Labrador’s Meredith Shaughnessy (the report contains numerous disclosure examples):
1. Rethink the Traditional Committee Oversight Matrix: Many companies cite the desire to streamline text and remove duplication in their proxy statements. We recommend taking a look at your Committee descriptions and Risk Oversight disclosures to see how they overlap. Similarly, think about whether key risks are overseen by the Board or a singular committee, or whether there is a more cross-functional approach.
2. Show an Integrated Approach to Risk Throughout the Company: The traditional Board/Committee/management oversight graphic often includes only a high-level overview of the role of management in managing risks, with a separate discussion on the ERM process. Two Dow 30 companies take a different approach, incorporating a crisp, easy-to-digest graphic that shows their top-down/bottom-up risk management governance structure.
3. Reflect Better Alignment Between Risk, Strategy and Sustainability: Growing anti-ESG backlash and the current political and legal environment have caused companies to rethink whether and how they report on sustainability-related topics in their proxy statements and annual reports on Form 10-K.
We recommend, however, taking a step back from the rhetoric and examining the interrelated nature of sustainability, risk management, strategy and competition, and long-term value creation. A Harvard Business Review article published in late 2024 noted just that, when the authors argued that corporate leaders should (1) solve for sustainability issues that “have the most impact on the bottom line,” and (2) “identify the most material negative impacts your firm is having on society, and invest serious resources to developing practical solutions,” which goes directly to strategy, value creation, and long-term competitiveness.
Similarly, PwC makes a persuasive case for integrating sustainability into a company’s ERM process. Among other outcomes, PwC notes that the integration will help companies “align with strategic goals, strengthen resilience, capitalize on new opportunities, and fortify their position in an ever-evolving business environment.”
