When organisations are thinking of appointing individuals onto their Board, what characteristics are traditionally being taken into consideration? One would argue that many consider characteristics such as passion, knowledge, mindset, support and team player. Under the umbrella of knowledge, one would tend to look for individuals with a deep knowledge in one or more of the following areas, namely finance, legal, marketing, planning, and industry specific expertise.
Nobody is arguing the above to be anything but good and acceptable. Board members should be passionate about the cause they are supporting, be knowledgeable in their own way, be supportive of and a team player to the other board members by sharing knowledge and expertise with them. Board members are not expected to be the know-it-all across all aspects. However, above all, the individual’s mindset has to be right - a “can do” attitude to help the organisation thrive and not stumble.
But how many members of the board are knowledgeable and aware of risk and the management of risk. Is the Board geared in the right way to identify the organisation’s risks (beyond the traditional credit, market, geographic and liquidity risks) and how these risks interact and impact the organisation’s strategic goals and objectives? Many organisations still underestimate the value Enterprise Risk Management (“ERM”) brings to the table. ERM is not a compliance tool that overloads the bureaucratic process and slows down operational progress. On the contrary, ERM is more of a value-added discipline that could actually be transformed into a critical asset. The Board needs to be able to guide and find its way through the myriad of risks the organisation faces, beyond their respective siloed areas of expertise. The Board should therefore ensure that at least one of its members will take this task to heart.
This does not imply taking a hands-on micro-management approach…….
So next time round, if you are serious about enhancing your stakeholder value, start considering whether your team will actually fill all of your bases, including that for (enterprise) risk management.
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