Category: Risk Management

Five Focal Points of the 2011 NACD Board Leadership Conference

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  1. Instant technology. Throughout the conference, speakers discussed the importance of instant technologies, such as social media (Facebook, Twitter, etc.) and cloud computing—particularly the need for directors to be aware of these products in order to provide effective oversight. In fact, during the “Reshaping the Risk Agenda” session, Chuck Noski’s (vice chairman of Bank of America and director of Microsoft) three areas that will transform risk oversight at the board level all related to the increasing pervasiveness of technology: the “consumerization” of technology, cloud computing, and the increasing sophistication of hackers.
  2. China. Multiple sessions referenced China and the increasingly global marketplace. From futurist Edie Weiner to Honeywell chairman and CEO David Cote, speakers urged attendees to adopt a new perspective regarding fast-growing emerging markets. Specifically, Cote encouraged directors to view China as a “partner, competitor, and supplier.” During NACD chairman Barbara Hackman Franklin’s panel on “Doing Business in China,” the discussion extended to intellectual property rights.
  3. The new consumer base. Political pollster John Zogby fascinated conference attendees with his lunchtime session on “The Way We’ll Be.” Having examined the American consumer for the past two decades, Zogby recommended that directors be aware of the new generation of consumers—the “global citizens.” Born roughly between 1979 and 1993, he said that this generation communicates and identifies themselves in a far different manner than the baby boomers.
  4. Flexibility in business strategy.  KPMG’s Mary Pat McCarthy noted that directors should know that the “unimaginable does happen.” To ensure long-term success, business strategies should be flexible enough to quickly adapt to the constantly evolving business environment. Edie Weiner advised directors to take note of the “carrots and sticks” in their businesses—observing whether short- or long-term gain is rewarded.
  5. Recruit for the future. With these rapidly changing technologies, emerging global markets, and new consumer bases in mind, boardroom composition should reflect a set of directors that can meet future needs. During a panel on “The Next Generation of Board Leaders,” Ralph Whitworth (founder of Relational Investors LLC) suggested that boards recruit for both current gaps in necessary skill sets, as well as the gaps they expect three to five years down the road.

 

Ensuring Accountability and Assessing Risk: All in a Day’s Work for the Audit Committee

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The current economic environment makes the role of the audit committee more important than ever. Conducting effective financial oversight amidst sweeping legislative reforms while monitoring market instability both abroad and domestically is no easy task.

Today’s audit committee directors carry some of the greatest responsibilities assigned to boards. Both investors and regulators continue to call for increases in accountability and transparency, and this duty increasingly falls on the audit committee.

August 12 was the official “Day 1” for the Securities and Exchange Commission’s (SEC) new Office of the Whistleblower, which began implementing the provision of Dodd-Frank requiring the Commission to pay rewards to eligible whistleblowers that provide the SEC with information on violations regarding federal securities laws that lead to enforceable action.

With an official “bounty system” in place, the stakes for risk oversight are higher than ever. Corporate employees have new incentives to forgo internal compliance procedures and directly seek out the SEC with any information they may have regarding financial securities violations.

The audit committee members play a key role in ensuring that their company has the necessary procedural systems in place to flag and manage potential federal securities law violations before SEC action is sought or necessary. Under Sarbanes-Oxley, the audit committee is required to establish procedures for the receipt, retention and treatment of complaints regarding any accounting or auditing matters. A company’s failure to flag securities violations has the potential to not only damage a corporation’s image, but increase legal costs as well.

Additionally, audit committees of companies listed on the New York Stock Exchange are responsible for discussing policies with respect to risk assessment and risk management. Some boards form risk committees to monitor risk. Indeed, under Dodd-Frank, this is required. However, NACD believes that risk oversight is a task for the full board and all its committees. Certainly, the audit committee can play a key role in identifying risks that impact financial report. These areas may include accuracy of business and financial statements and effectiveness of key business information systems and accounting controls, as well as legal and regulatory issues and the maintenance of ethical codes of conduct. That is a lot for one committee to handle.

This year’s NACD Board Leadership Conference will host an Audit Committee Forum, run jointly by NACD and KPMG’s Audit Committee Institute, which will offer directors who serve on audit committees the opportunity to learn from the best in the business and improve their own value to the boards on which they serve. The forum will explore the leading practices in audit committee effectiveness and help directors identify emerging risks. In addition, forum participants will get the latest updates on financial reporting and potential tax legislation and have the opportunity to engage in peer exchange discussions on topics of the utmost importance to committee agendas.

To register for the NACD Board Leadership Conference, go to nacdonline.org/conference. Additionally, directors and executives from NASDAQ-listed companies will save 10 percent on the registration price by entering coupon code OMXSAVE. To register or ask questions in person, please email registration@NACDonline.org or call 202-572-2088.

Risk Assessment: Expect the Best, Plan for the Worst

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Organizations face risk on multiple levels and from an enormous range of factors. And being seen as a “high-risk” company certainly impacts valuation. Of the many concerns for risk managers today, two of the biggest are global economic uncertainty and information technology.

For boards concerned with how different economic forces will impact the corporations they oversee, today’s environment provides plenty of challenges and opportunities. Last month, the Wall Street Journal reported that as the Federal Reserve’s latest economic stimulus initiative (QE2) comes to a close, investors are keeping a close eye on their portfolios and shying away from riskier assets. According to a recent Bloomberg article, after his recent meeting with German Chancellor Angela Merkel, President Obama made it clear that U.S. economic growth is still at risk from the precarious economic situation in Europe.

Cyber attacks that lead to data theft threaten not only the valuable information a company might possess, but the trust and confidence of its investors as well. Just ask Sony, Epsilon and RSA Securities, who all recently suffered data breaches.

In a letter to Senate Commerce Committee Chairman Jay Rockefeller (D-WV), the Securities and Exchange Commission (SEC) recently stated that publicly traded companies should disclose the threats and potential impacts of cyber attacks. The SEC guidance came in response to a letter sent by Senator Rockefeller, who noted that “it is essential that corporate leaders know their responsibility for managing and disclosing security risk.”

Because of these new oversight and risk management demands and higher stakes for corporate boards, NACD is offering two separate sessions discussing risk assessment and management at this year’s NACD Board Leadership Conference in Washington, DC from October 2-4.

The Reshaping the Risk Agenda session features expert speakers who will explore possible blind spots in risk assessment and the implementation of early warning systems, as well as the importance of scenario planning. A major focus of the panel’s discussion will be the board’s role in overseeing risk versus avoiding risk in the current economic environment.”

This year’s conference also offers a Risk Board Committee Forum where professionals from the leading global management consulting firm Oliver Wyman will discuss methods for improving oversight processes and examine the links between strategy and risk. A special focus of this forum discussion will include the board’s role in overseeing IT risk.

NACD understands that the best way to mitigate risk is through education and learning from people who have already been on the front lines battling these issues—and winning. That is why we want you to be there to share your experience and hear from your peers.

To register for the NACD Board Leadership Conference, go to nacdonline.org/conference. Early-bird discounts are in effect until July 31.  Additionally, for directors and executives from NASDAQ-listed companies to save 10 percent on registration prices, please enter coupon code OMXSAVE. To register or ask questions in person, please email registration@NACDonline.org  or call 202-572-2088.