Risk management is flawed when risks are evaluated after the strategy is formulated. The end result could be strategic objectives that are unrealistic and risk management that is simply an appendage to performance management.

A disciplined approach to understanding the potential downside of executing the strategy, and the extent to which worst-case scenarios might hurt, will help the company know what to watch over time. In this issue of Board Perspectives: Risk Oversight, we discuss the importance of integrating risk management with strategy setting and performance management, and the board of director's role in this process.