When the governance arrangement of 'Organisation A' involves delegation of responsibility for managing some risks to an external 'Organisation B', who is the "owner" of the delegated risks ?

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BlackTom AI · Accepted Answer

Restating the question and options: When Organisation A delegates some risk management to an external Organisation B, who is the 'owner' of the delegated risks?
Option 1: Organisation A. This option posits that Organisation A remains the owner of the delegated risks even though it outsources management. In governance and risk management, the ownership or accountability for risk typically stays with the delegating organization, with the external entity acting as a service provider or risk owner for specific controls but not the ultimate owner of the risk.
Option 2: Organisation B. This would imply that the external entity becomes the owner of the risks it is asked to manage. While Organisation B may be responsible for implementing and supervising risk controls, ownership (accountability for the risk’s existence and impact) usually does not transfer to the service provider. Treating B as the owner neglects the remits of the delegating organisation and its ultimate accountability.
Option 3: Both of the above. Suggesting that both organisations share ownership contradicts the usual governance principle that the ultimate risk owner is the organization that delegates the risk and remains accountable to stakeholders. Shared ownership would blur accountability and complicate governance.
Option 4: None of the above. This would imply that neither A nor B is the owner, which is inconsistent with the standard model where the delegating organisation retains ownership while management is performed by the external party.
Now, analyzing each choice in more depth: 
- For Option 1 (Organisation A): The key idea is that governance accountability remains with the delegating entity. Organisation A sets the risk appetite, approves the risk management plan, and remains responsible to regulators, boards, or other stakeholders. Delegation does not relinquish ownership; it transfers the obligation to manage with due diligence to Organisation B under agreed terms. Therefore, Option 1 aligns with common governance practice.
- For Option 2 (Organisation B): While Organisation B may have operational responsibility for implementing controls and monitoring risk indicators, claiming it is the owner would misattribute accountability. The risk owner must be the entity that defines the risk context, accepts the risk, and bears the consequences of the risk materializing. B’s role is effectively that of risk custodian or manager, not owner.
- For Option 3 (Both of the above): Shared ownership would create ambiguity in accountability. In practice, one entity remains the owner for governance purposes, even if another party handles day-to-day risk management tasks. This split can undermine clear decision rights and accountability.
- For Option 4 (None of the above): Denying both A and B as owners is inconsistent with standard governance models where the delegating organisation maintains ownership while outsourcing management tasks to the service provider.
Putting the pieces together, the most coherent interpretation is that the owner of the delegated risks remains Organisation A, the entity that delegated the responsibility, with Organisation B handling the management tasks under agreed terms and service levels.
Finally, consider practical implications: ensuring clear ownership helps with accountability, reporting, and audit trails; it also clarifies liability, risk transfer, and regulatory compliance obligations across both organisations.

CVEN30008_2025_SM1 Module 2.2 Quiz

When the governance arrangement of 'Organisation A' involves delegation of responsibility for managing some risks to an external 'Organisation B', who is the "owner" of the delegated risks ?

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