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.
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.
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.
Lead directors play a significant role in the boardroom, enhancing board effectiveness by acting as independent figures in communicating the needs between the company’s management and board. Five years ago, only 39 percent of boards had lead directors. That number has almost doubled. Today, 66 percent of boards have a lead director.
NACD broadly defined the duties of the lead director in a 2004 Blue Ribbon Commission Report. Leveraging their years of experience, the NACD Blue Ribbon Commissioners will clarify the role of the lead director in order to enhance the effectiveness of the lead director in the boardroom. The 2011 report will expand the earlier recommendations by exploring how the lead director role can be used to the fullest extent. Specifically, the report will discuss the evolving roles and responsibilities of the lead director; the ideal profile of a lead director; and key relationships and communications of the lead director, including those between management and shareholders. The report will also offer recommendations for future challenges facing the role.
The 2011 Commissioners who contribute their views to the report are directors from leading companies and corporate governance experts. In addition to co-chairs Barbara Hackman Franklin and Irvine Hockaday, the panel includes:
Add another skill to the list of qualities every director should possess: technological literacy. Technology-specific issues can get short shrift in the boardroom, because most directors lack “expertise” in the field. However, there are constantly stories of the pervasive aspects of technology, an area no longer reserved for companies such as Google, Apple or Microsoft. Just this week, it was revealed that some smartphones track and collect user location, and there was a potential security breach at a popular online game platform.
It would be unfathomable for a director to ignore a discussion about the company’s financials, because they were not an “audit expert.” Technology should be viewed in the same manner. The topic of IT risk oversight has been covered recently in both this blog site,and in a recent NACD white paper, “Taming Information Technology Risk: A New Framework for Boards of Directors,” published in collaboration with Oliver Wyman. This white paper details four areas of IT risk a firm could be exposed to:
Service & security risk
Of the four areas mentioned, recent data has placed a spotlight on the oversight of competitive risk, or the risk of competitors getting to the market faster. According to Arbitron and Edison Research, the amount of time Americans spend consuming radio, television and the Internet increased by roughly 20 percent over the past decade, from a daily average of 6 hours and 50 minutes in 2001 to a daily average of 8 hours and 11 minutes in 2011. This dramatic increase in consumer use of technology should be considered in all strategic planning, which is consistently ranked by directors as the top boardroom priority.
Boards are also directly experiencing the pervasive quality of technology. A recent article from the Wall Street Journal noted the increased use of videoconferencing at the boardroom level. Once avoided due to slow connections and poor visuals, Cisco Systems has improved the technology in its “telepresence,” a system that simulates in-person meetings. Many high profile boards use advanced videoconferencing for meetings, including American Express Co., Wal-Mart Stores Inc. and PepsiCo Inc. While virtual meetings are unlikely to create the collaborative dialogue created by in-person meetings, their use can supplement those in-person meetings, reduce travel expenses and potentially facilitate more international diversity in the boardroom.