On The Minds Of Boards

This time I’d like to share an interesting article written by Dr. Leslie Gaines-Ross about the importance that reputation is achieving on Boards, at least, in the United States:

The second survey of Board Directors was just issued. The survey is conducted by Eisner Amper, audit, tax and business advisory professionals. They used their database and NACD’s Directorship magazine’s subscriber list of corporate directors. The survey reports on the opinions of 142 directors representing publicly and privately-held companies.

One of the questions they asked was which risks are most important to their boards, that is, besides financial risk (which probably begs a 100% answer!). The chart is below. At the top of the list is reputational risk — 69% said this is most important today. Reputational risk surpasses regulatory compliance risk (61%), CEO succession (55%) and IT risk (51%). I would posit that if this survey was done in the past few weeks, IT risk might have jumped up higher as a factor of major concern. The hacking and hobbling of computer networks at Boeing, Sony and the White House gmail accounts have had to certainly affect risk management concerns at board level. With regard to security risks, Eisner Amper wisely says: “The tools of today’s business heavily revolve around information technology, the Internet, the speed and degree of data transmission, and the pervasiveness of social media.” And everything that affects business affects reputation.

Aside from financial risk, which are most important to your boards?
Reputational risk 69%
Regulatory compliance risk 61%
CEO succession planning 55%
IT risk 51%
Product risk 34%
Privacy and data security 33%
Risk due to fraud 21%
Outsourcing risk 14%
Tax strategies 14%

Another question they asked which I like was where board directors go to for new information. In the 2011 survey, the leading sources were company management, publications, Internet, accounting/advisory firms and conferences (at 33%). I liked seeing the importance of conferences among the other sources because I firmly believe that getting out of the office and listening to other points of views provide opportunities for thinking beyond the same old ways about the same old problems. I wish I did more of this myself. We all need to close the door on our silos. For board members, this is a good sources considering how the problems they face have to be on high boil these days.

Primary Sources for New Information for Board of Directors

Company management 73%
Publications 54%
Internet 46%
Accounting and advisory firms 36%
Conferences 33%
Personal network 33%
Associations 229%
Law firms 17%
Consulting firms 11%

At the end of their executive summary, Eiser Amper concludes:

“Protect. Protect. Protect. Reputational risk needs constant monitoring and analysis of the broader issues…Brand, company and personal reputation can change overnight. The speed of today’s business was unimagineable in years past, but its impact is real and protection is the name of the game.”

2 Responses to “On The Minds Of Boards”
  1. Herbert Wade dice:

    Interesting conclusions in this article Marta. Some key points to complete the opinion of this managers:
    * Security has been one of the top 2 concerns of IT managers during the last ten years. In fact, IT security is one the main lines in the IT budget. Nevertheless is not easy to maintain data absoletuley secured. Processes must be well defined and implemented, and unfortunately companies focus their efforts on tools, but not in how to manage security. Managers should demand to their CIOs initiatives to define and succesfully implement policies and processes.
    * About Internet and security. The recent risk problems suffered by important companies like Sony doesn’t mean Internet is not secure. Risks exists when data is on the Internet, but also when it is located in private networks. In both cases the problem is not to protect the data properly.
    * About conferences as a source of information for decision-making process. From my point of view nowadays there are too much conferences, and the majority are promoted by vendors trying to sell their products or services. Conferences should be content-oriented, not selling-oriented. So the point is how to select what conferences we should assist. It is like a kind of infoxication due to so many conferences. Some ideas about how to choose what conferences are really interesting?

    • Dear Herbert, thanks for your input about the ICT sector that many us – including myself – I’m sure didn’t know. Anyway, I think the interesting issue in the article – and the author’s purpose – is to highlight the fact that any risk to which a company is exposed can have an effect on its reputation, especially at a time that information -whether or not is true – can run so fast an easily on Internet or through other tech devices. As reputation can be affected by risks that at a first glance are unrelated to it, is not difficult to understand why it has become a major concern for boards. Do not you think so?

      Regarding your comments about conferences, I think that, as with nearly all media, the reliability of the “source” should be contrasted. It also happens with publications and the information that flows online. My advice: try to “investigate” what is behind the source.


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