Here’s What Your Board of Directors is Thinking About These Days
What are the directors of leading companies focused on these days?
You guessed it: Risk.
In fact, according to the 8th Annual “What Directors Think” survey released last week by PricewaterhouseCoopers and Corporate Board Member magazine, 69%
of the directors polled believe that their risk has increased over the last year — a substantial jump from the 38% who answered so in 2008.
The majority of directors in the survey (75%) understand that responsibility for risk management rests with the full board, and 88% consider their board to be capable of monitoring their companies’ multitude of risks. But even so, about two-thirds (66%) would like to increase the amount of time spent discussing risk management during board meetings.
These directors rate risk first among responsibilities to which they should pay the greatest attention, after their focus on profitability and shareholder value.
Apparently, directors even think about risk after they leave the boardroom. When asked, “What keeps you up at night?,” 59% said “unknown risks.”
Of course, we all want to do a better job at predicting and mitigating risk, and when asked to rank which danger signals they consider either important or very important, the directors in the poll cited:
Restating earnings 95%
Missing strategic performance goals 92%
Multiple whistleblower incidents 88%
Dissatisfied customers 85%
Difficulty in lining up finance 82%
Employee lawsuits 72%
“Directors’ focus on risk management is particularly timely, given our expectation that companies will have to provide new disclosures about their boards’ risk oversight in upcoming proxy statements,” said Catherine Bromilow, a partner in PricewaterhouseCoopers’ Corporate Governance Group.
It’s also interesting to note that directors in the survey gave a resounding (88%) “no” when asked if government limits on executive compensation are justified. Likewise, an overwhelming 97% do not want the government to impose any further limitations on pay, and more than three-fourths (76%) say compensation issues should be left to the board.
The 2009 survey findings are highlighted in Fourth Quarter 2009 Corporate Board Member issue and can be found here, at the Corporate Board Member website.
At The Corporate Executive Board, we advise our clients to incorporate risk agility into their risk management process by spending less time on risk assessment and more time on building effective risk response capabilities. We find that the most progressive organizations will cascade the concept of risk velocity throughout their organization to improve the ability to assess risk exposure and to lay the groundwork for a more effective response.
1