Board Perspective: Risk Oversight

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Issue
147
01/2022
Our global survey of C-level executives and directors highlights the influence of COVID-19, people and culture issues, the economy, and digital transformation on the near-term risk landscape. In the following table, we rank our survey’s highest-rated risk themes in order of priority to provide a context for understanding the most critical uncertainties companies face over the next 12 months. Key takeaways follow. Pandemic-related concerns continue to linger in the near term. New variants of the coronavirus and the inability to vaccinate enough people in some countries or provide sufficient...
Issue
146
12/2021
Transparency and consequences can be powerful leadership deterrents. For the board and CEO and their personal brands, the critical question is, what will key decision-makers in their organisation do in situations when no one is watching? When the subject of ethical and responsible business behavior arises, Warren Buffett advises managers to evaluate every action they take and not just by legal standards, but also by what he calls the “newspaper test.” When managers have any doubt about whether a decision or action is right or wrong, they should imagine how they would feel if it were reported...
Issue
145
11/2021
In the third decade of the 21st century, smart companies and boards across all industries recognise that the pace of technological change continues to unfold at warp speed. The question in the boardroom a decade ago — “Should we invest in digital transformation?” — has transitioned to a different question today: “How much should we invest and, more important, how fast should we invest, given our accountability to shareholders?” The simplicity of this new question belies the underlying complexities of the strategic conversation around prioritising resource allocation — a conversation that has...
10/2021
Informed organisations in all industries are establishing carbon emissions reduction and net-zero carbon emissions targets. Directors’ conversations on strategy have an important role in businesses’ energy transformations. Energy consumption is a priority. The introduction of renewables continues as costs decline. The percentage of electricity consumed through non-fossil fuel sources — solar, wind, nuclear and hydroelectric energy — in the total energy consumption mix is growing. The Biden administration has made climate change a priority as other countries all over the globe embrace green...
Issue
143
09/2021
Ransomware is a current threat many people are struggling to understand and manage. Amid the headlines and uncertainty, how can the board respond strategically? Reputation damage, hefty ransoms and business continuity are all concerns with ransomware. But the core of the conversation is about the potential loss of intellectual property and customer information and the specter of unpleasant dealings with criminals and other parties who may or may not be sponsored by nation-state actors. The market still doesn’t know the number and full scope of these attacks, as few companies victimised by...
Issue
142
08/2021
As disruption and the unexpected have become the norm in many industries, clarity is needed around framing the boardroom risk conversation. In 2009, in the wake of the great financial crisis, the National Association of Corporate Directors (NACD) published a report on the board’s risk governance process, recommending five risk categories for boards to differentiate risks for discussion purposes. Two categories — critical enterprise risks and emerging risks — are differentiated from normal, ongoing day-to-day business management risks, board approval risks and governance risks, with the idea...
Issue
141
07/2021
Creating a work environment that encourages creativity and innovation is paramount to a company’s agility and longevity. A crisis such as the COVID-19 pandemic is a time when these attributes, latent or not, are put to the test. A facilitated discussion with active directors at a recent National Association of Corporate Directors event in the United States focused on the significance of agility as an important driver of success in a mercurial environment — and how, for many companies, digital maturity and future readiness correlate with the ability to innovate. The following key takeaways...
06/2021
The future of a redesigned workstream looms large on the horizon. Strategic issues around returning remote workers to physical facilities, integrating new technologies into the business, acquiring and retaining the talent needed to execute digital strategies, and transitioning to a more agile workforce abound. As companies sharpen their focus on digital transformation initiatives and reimagine their business models to remain competitive, now is as good a time as any to rethink the future workplace. The right questions can help steer boardroom discussions in productive directions as markets...
Issue
139
05/2021
There is a growing interest across the world in the feasibility of quantum computing and when it will finally become a reality in business. And that’s for good reason. Quantum would enable problem-solving capabilities to address simulations and complicated optimisation questions involving a formidable number of variables and potential outcomes at amazing speeds not attainable with conventional computers. Quantum-inspired algorithms could bring innovative solutions and approaches to product development, reduce time to market, optimise customer delivery, and speed up data transfers. There isn’t...
Issue
138
04/2021
On February 26, 2021, the Board of Governors of the Federal Reserve System (FRB) in the United States issued expectations for boards of large financial institutions as a standard for its regulators when they assess board effectiveness. The guidance applies to all domestic bank holding companies and savings and loan holding companies with total consolidated assets of $100 billion or more, with certain exceptions, as well as systemically important nonbank financial companies designated by the Financial Stability Oversight Council for FRB supervision. The FRB’s focus on board effectiveness...