Posts Tagged ‘Risk Management’

The Global Question: Do Directors Have What it Takes?

November 3rd, 2010 | By

Having a global perspective – or at least someone on the board asking the right questions relating to global changes – is critical for today’s companies. Major international demographic changes are taking place in the U.S. and around the world. These changes impact how we do business and where our opportunities and challenges are.

At a recent gathering of corporate directors, many questions were raised about “the global question.”

  • About who in the boardroom is raising the questions, and do we have the range of skill sets, experiences, and backgrounds necessary to address these changes in the competitive environment?
  • Is someone asking what our crisis communication plan is? The plan needs to be developed well before a crisis in order to be out in front of the social media avenues, delivering the message concerning the crisis.
  • For insights on how former Exxon Mobil director Reatha Clark King and former ConocoPhillips chairman and CEO Archie Dunham handled major crises at their companies, view NACD’s webinar  (complimentary for NACD members); for more and for sample plans, see NACD’s Board Leadership for the Company in Crisis, (full disclosure: I co-authored this publication).
  • Do we have board members raising the right questions about communications in this new environment of social media, blogging, and real-time news? (p.s., have you seen some of the headlines in NACD Directors Daily about this issue – Social Media vs. Anti-Social CEO, Facebook, Twitter Help Companies Connect, or The Democratization Of Corporate Philanthropy?)

If we are to protect the reputation of the company, we can’t be the last to get the message out. Changes in criteria for board leadership to meet today’s challenges can be overlooked as well. We need to look carefully at the challenges and opportunities in our current and future environment, our short-term and long-term strategy, and ask ourselves whether the right people are at the table to meet those challenges. Click below to see a quick video about how NACD’s Board Advisory Services can help your board meet global (and other) challenges head-on.

NACD Board Advisory Services: Custom, Confidential In-Boardroom Corporate Board Education and Evaluations

Beyond Strategy: How Boards Can Accelerate ROI of a Deal

October 8th, 2010 | By
Highway of Life: Expect Delays

Highway of Life: Expect Delays

An old comic strip in my office shows the character Ziggy in a car facing two billboards: “Highway of Life” and “ Expect Delays.”  This sentiment seems to apply to Sanofi-Aventis’s prolonged merger negotiations with Genzyme.

According to published reports, the apparent source of the delay has been agreement upon price, given the manufacturing problems at Genzyme. However, a bigger question the board must assess is whether senior management can address these issues within a timeframe that provides the expected return on investment.

This situation is not unique. As opportunities for “bargain” deals resulting from performance problems become more plentiful in our rapidly changing business environment, it’s critical for boards to go beyond questioning the logic and price of the deal and also assess the potential impact of cultural issues that can make or break success.

Here are questions to ask senior management:

  • What are the business culture strengths and obstacles that will impact integration (e.g., speed of decision making, communication flow, etc.)?
  • What plans exist to deal with the natural organizational anxiety and resistance that comes with mergers?
  • What is the plan for communicating with stakeholder groups to gain their support before and during integration?

Asking these and other questions regarding culture, combined with questions regarding strategic fit, will enable your board to not only accelerate ROI in the short term but in the long term as well. 

Pamela S. Harper

Pamela S. Harper

Pamela S. Harper

Pamela S. Harper is founding partner and CEO of Business Advancement Inc (BAI). and author of the book Preventing Strategic Gridlock (Cameo Publications). She is on the boards of two nonprofit organizations. Since 1991, BAI has collaborated with senior executives and boards to develop strategy, increase leadership effectiveness, and improve organizational engagement and capability for maximum innovation, growth and profitability.

Straight Talk on Sustainability

October 4th, 2010 | By

With all the noise on the topic, I recently decided to spend some time asking Gib Hedstrom to give me the straight scoop about how boards address the issue of sustainability. Gib has been the “expert in the room” on these questions at more than fifty board meetings with major global companies, including Air Products, Ashland, and AlliedSignal (Honeywell).  I asked him three simple questions. (OK, actually I asked him four):

  1. What’s the best way for a board to define sustainability?
  2. What do the “better boards” do in the area of sustainability?
  3. As an individual director, what should I know about the topic? What questions should I be asking?

Here’s how Gib responded:

1. What’s the best way for a board to define sustainability?

Sustainability is about achieving enduring growth and profitability in the harsh face of 21st Century realities. The “new world order” of a swelling population, oil depletion, global warming, water scarcity, and economic turmoil makes this the fiercest competitive battleground for the next 20 years. It means rethinking everything.

It’s what I call “The Messy Transformation.” Most companies face significant risks. Yet whether you sell technology or transportation or consumer products – the opportunities are massive.

2. What do the better boards do in the area of sustainability?

The better boards bring sustainability into their deliberations about both risk and opportunity. On risk, they do three things:

  1. Take a Business Portfolio Risk approach. For example, 20 percent of U.S. coal plants are scheduled to shut down by 2015. If that’s your energy source, it calls for a Plan B — and fast!
  2. Encourage action on managing the relevant risk profile (short and long term) on Carbon Risk. For example, we see Samsung announcing that by 2013 it will cut by 50 percent the greenhouse gas emissions from its own operations and from the use of its products. We see Sony announce its plans to achieve a zero environmental footprint by 2050.
  3. Keep Operational Risk management front and center. You don’t have to look far back in recent headlines for evidence about what a single disaster can do to your operations and public trust.

For the opportunity side, it’s about investment. Even in this uncertain financial climate, over $100 billion has been invested in renewable energy in the past two years. Companies like Cisco, IBM, Google and Microsoft are rushing to capture “smart grid” growth opportunities. P&G has a five-year goal to accumulate $50 billion in sustainable product sales by 2012, and will have “Sustainable Innovation Products” in 30 million U.S. homes by the end of this year. Bank of America recently announced it is ahead of schedule on its 10-year, $20 billion business initiative focused on addressing climate change.

3. As an individual director, what should I know about where a company stands on sustainability?  What questions should I be asking?

Directors really struggle with sustainability. In the 2009 NACD Public Company Governance Survey, directors rate their effectiveness at sustainability (corporate social responsibility) almost dead last. Meanwhile, in 2009 the number of shareholder resolutions on sustainability reached a record level. Investors care!

At the next board meeting (or better yet, before it), ask these questions:

  1. What would it look like to be a true sustainability leader? What would be the characteristics (e.g., zero waste, carbon neutral)? What would the portfolio look like (e.g., percent of sales from green products, services and solutions)? Is this just from our own operations or across our full supply chain?
  2. Do we have a robust sustainability strategy and a multi-year plan that identifies our risks and opportunities? Our own sustainability scorecard?

So that’s what we hear from the true expert. Now, what does your board do?