Risk management — a strategic leadership tool for the Board of Directors

Interview with Venera Abdraimova, Member of the Chamber of Independent Directors of the Kyrgyz Republic, certified corporate director, expert in corporate governance, risk management, and sustainable development.

— Venera, you are a certified corporate director and expert in risk management and sustainable development, with experience in the banking and payment sectors. Do you think that risk management is becoming a hot topic at the board level? Why do you think this is happening now?

—This is a reflection of global trends. Risks are no longer purely operational issues — they have become a matter of sustainability, reputation, and even business survival. The board of directors must understand the threats facing the company, the decisions that could lead to critical failures, and how to build an effective response system. In a world where regulatory, technological, and behavioral risks are intertwined, a passive stance on the part of the board of directors is becoming unacceptable.

Statistics confirm this: according to a study, geopolitical conflict is seen as the greatest risk in the Middle East (41%) and Central and Eastern Europe (34%). In Western Europe, cyber risk (27%) is slightly more concerning than the shortage of skilled workers (25%) and inflation (24%), with macroeconomic volatility topping the list at 29%.

—What role does the Board of Directors play in building a risk management system?

— The Board of Directors is not just a supervisory body, but a strategic architect of the risk management culture. The Board does not manage risks “manually,” but it shapes the company's approach and culture to risk management, sets the tone from the top, and ensures that risks are taken into account in decision-making.

One of its main functions is to determine the organization's risk appetite, provide strategic vision, and establish guidelines that treat risk as an integral part of value creation rather than a formal obligation.

It should be noted that the maturity of risk management is directly dependent on the quality of the Board of Directors' involvement. The Board plays an important role in independently monitoring the organization's preparedness for stress scenarios and crises. Only with a proactive Board of Directors can risk management become a real tool for protection and growth.

— Some believe that risk management is the responsibility of management. Where is the line between the role of the board of directors and operational management?

— The executive team does indeed manage risks at the operational level — identifying, assessing, and mitigating them. But the board of directors sets the framework within which management operates. This involves, first, establishing the level of acceptable risk and, second, checking that the strategies being implemented are consistent with this framework. The Board of Directors is also required to receive regular reports on key risks, initiate independent reviews and, if necessary, suspend risky initiatives if they exceed the accepted risk appetite.

In international practice, as in Russia, the role of the Board in risk management is enshrined not only in corporate governance codes but also in regulatory requirements.

Tell us, what risks does the Board of Directors most often deal with today?

—In addition to classic operational and financial risks, technological, reputational, and ESG risks are increasingly appearing on the agenda of the Board of Directors. The latter cover issues of ecology, social responsibility, and management quality. For example, ESG risks include non-compliance with environmental reporting standards, unethical employee behavior, and lack of transparency in decision-making. Such risks directly affect access to financing, customer relations, and regulatory requirements.

—Is ESG just a buzzword or a real management factor?

— ESG is no longer an “option” but part of the risk profile. While ESG risks used to seem abstract, today they translate into real consequences: loss of investors, customers, and rating downgrades.

The board of directors must understand how the business affects society and the environment, and how this affects the business itself. ESG and risk management are not two parallel lines, but interrelated trajectories.

ESG and sustainable investing are becoming cornerstones for corporate and private capital organizations. A report published by Deloitte notes that up to 72% of participants in international M&A transactions said that ESG is a consideration in more than 50% of their transactions, and 83% are willing to pay a premium for companies with a strong ESG profile.

What lessons can we learn from international risk management practices? Are there any examples of models or approaches that you think are particularly relevant for boards of directors in emerging markets such as Kyrgyzstan?

—International experience shows that risk management is not just a duty, but an important tool for strategic management. For example, in developed countries, boards of directors are actively involved in discussing key risks, participate in stress testing, undergo regular training, and take part in shaping risk appetite. The “three lines of defense” principle is important, whereby the board monitors the work of both internal audit and risk management, rather than simply approving reports.

This is very relevant for Kyrgyzstan. We can adopt the practice where the Board of Directors does not simply approve documents, but asks the right questions and helps the company move forward. This is especially important in an unstable economy, with digitalization and new requirements from regulators. A well-designed risk management system makes a business stronger, more transparent, and more attractive to investors.

What advice would you give to companies that are just starting to build this system?

Start with diagnostics. Does the company have a unified view of risk? Are roles and responsibilities defined? Formalize processes, but don't forget about culture. Involve the Board of Directors in risk discussions — this is not just a “management issue.”

And be sure to view ESG not as an external agenda, but as an internal obligation. It's not just about reporting, but rather about reputation, capital, and sustainability.

—And finally, what is your personal principle as a board member?

—To be not just an observer, but an active participant in creating a sustainable and responsible company. The Board should not be afraid to ask uncomfortable questions, critically rethink established approaches, and recognize signals of change in technology, society, and regulation in a timely manner. Risk management is not about fear, but about maturity, awareness, and strategic thinking.

It is important to understand that risks are not always negative. They are decision points.

A responsible Board of Directors is not one that acts only when threats arise, but one that manages proactively, developing anti-crisis and ESG-oriented development scenarios.

A responsible and forward-thinking Board of Directors is one that fosters a culture of sustainability, accountability, and transparency. This is where true corporate leadership comes from.