What is a common approach for the Board to manage risk?

A common approach for the Board to manage risk involves appointing a risk subcommittee. This subcommittee focuses specifically on identifying, assessing, and mitigating risks that could impact the organization. By having dedicated members who specialize in risk management, the Board can ensure that there is concentrated attention on this critical area, allowing for more thorough oversight and proactive strategies to manage uncertainties.

The risk subcommittee can facilitate discussions on emerging risks, oversee risk assessments, and ensure that appropriate risk management policies are in place. This targeted approach allows for greater expertise and focus than might be achieved through broader Board discussions alone. Engaging a subcommittee underscores the importance of risk management within the organization and helps to establish a risk-aware culture.

The other options do not align as directly with the strategic governance role of a Board regarding risk management. Conducting annual audits and hiring an external regulator may support compliance and oversight but don't specifically tailor the focus to risk management alone. Reducing workforce costs might be a financial strategy, but it doesn't inherently address risk management issues. Thus, appointing a risk subcommittee stands out as a systematic and effective practice for the Board to engage in risk management.