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.
President Obama recently implored American business leaders to “get in the game” by spending trillions of dollars in corporate cash reserves on investments that would spur the economy. But he may have been preaching to the proverbial choir.
After years of stockpiling cash in the wake of the 2008 financial collapse, American businesses appear poised to do just what the President requested: invest and create jobs. Consider the latest NACDBoard Confidence Index (BCI), in which a majority of directors forecast that their companies will expand their current workforce in 2011. This is a significant development in what has been, in many key respects, a lethargic economic recovery.
Even after the economy began emerging from the depths of the recession in 2009, American corporate leaders remained fearful of another downturn, prompting companies to safeguard their cash reserves, now estimated to be about $2 trillion. That, of course, has contributed to a mixed economic picture today: many companies, while profitable, are unwilling to make the kind of large-scale investments that would put millions of unemployed Americans back on the payroll.
But as the NACD BCI for Q4 2010 suggests, the widespread fear of a double-digit recession appears to be over, with many corporate directors saying that they see the prospect of continued economic growth over the next year.
Now is the time for directors to begin looking at what best practices their companies should be putting in place to help position them for growth in the year ahead—whether those policies focus on compensation, ethics, accountability or competence.
A frequent discussion topic on the panels and presentations involved how these experienced public company directors are working through the current, challenging corporate governance environment and managing to focus on strategic initiatives while navigating new regulations associated with Dodd-Frank.
“It’s a tsunami!” said one, in a very passionate and deliberate tone. “It distracts management’s attention from competitiveness and innovation!” said another, in an equally convincing manner.
As the day progressed, it became clear that none of the new and proposed regulations—except for the proposed whistleblower rule and say-on-pay metrics—are bad for business, in isolation. It’s the additive, duplicative impact, coupled with a company’s need to take risks, explore the unknown and deliver financial returns for shareholders.
How does President Obama expect businesses to help reduce the unemployment rate, deliver innovation to keep this great country ahead, and create opportunities to raise capital from global sources when so many compliance-oriented activity tasks exist to be hurdled? The regulatory risks that boards must tackle are significant and exponential in nature. It’s like 1 + 1 + 1 = 10 when considered within the context of determining ROI from a potential investment.
I call this “Death by 1,000 cuts.”
Concerns among directors definitely exist regarding two proposed rules: 1) the whistleblower rule and 2) say-on-pay metrics. I frequently hear concern from directors and management that employees may ignore companies’ robust compliance systems. Similarly, I hear of unintended consequences regarding the say-on-pay ratios: If shareholders don’t like a CEO’s pay ratios, the company may move low-paying jobs overseas or hire contractors to fill current jobs.
Wow. Talk about unintended consequences. Regulations that could actually stifle innovation and erode employment appear to be opportunities that all companies and organizations should use to submit comments to Congressman Darrell Issa (R-CA), chairman of the House Committee on Oversight and Government Reform, who has asked for input on current and proposed regulations that are either not favorable to or do not help accelerate economic growth.
As NACD works to advance exemplary board leadership, we are working on behalf of corporate directors and corporate governance experts to let your voices be heard. Importantly, one of our goals is to shift the conversation from compliance to leadership. NACD is working to educate the Hill, regulators and the Administration, promote business-building opportunities, and amplify the voices of all directors.