This means developing limits and controls that absorb the amount of risk that a firm can take and putting in place reliable enforcement mechanisms. BIS central bankers’ speeches  3  Sound governance is fundamental to ensuring appropriate investment in risk management and application of its principles. Boards must be involved in establishing levels of risk tolerance and overseeing risk management.
Directors need to question growth rates in businesses and assess whether controls are keeping up with risks and if the business is resilient to shocks. This requires board members with expertise in banking, insurance and risk management. Boards also play an important role in ensuring that compensation systems are part of an integrated risk-management strategy.