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Corporate Leadership & Compliance: The Board of Directors’ Role (Part II)

Posted June 29, 2016

Critical areas of oversight for which the board of directors is responsible (Continued):

Risk Intelligence

The ability of businesses to survive and thrive often requires unconventional thinking and calculated risk-taking. The key is to make the right decisions – even under the most perilous, uncertain and turbulent conditions.

Boards today are not only key players when it comes to protecting their firm’s assets through conventional approaches to risk management (e.g., assessing current major risk factors and reviewing available options for their mitigation), but are increasingly involved with an upgraded form of “risk intelligence”. In short, finding opportunities ambiguity, information overload and often chaotic circumstances.

As noted in a 2010 Deloitte report based on concepts in the book Surviving and Thriving in Uncertainty: Creating the Risk Intelligent Enterprise by business consultants Frederick Funston and Stephen Wagner, “Organizations that prepare ahead of time to take advantage of shifts in the environment are far more likely to be able to move in time to seize competitive advantage than those who do not.”

Boards are ideally positioned to take a longer-term perspective that can aid in identifying the potential unintended consequences of short-term decisions, and to anticipate potential causes of failure, thereby increasing chances of survival and success through improved preparedness.

Reputation & Brand Integrity

Managing brand reputation is essential to any organization. Keeping and delivering brand promises are crucial elements in building strong customer-brand relationships. Reputation (aka “integrity”) is one of the most important ingredients to ensure the long-term success of a brand.

If trust, respect, and loyalty cannot be established by an organization’s brand, it will not be able to withstand today’s highly competitive global market.

Boards are now more than ever keenly aware of their accountability for the growth or deterioration of the company’s reputation. In its most recent annual Board of Directors Survey, U.S. accounting form Eisner Amper found that amongst respondents, reputational risk has now overtaken regulatory compliance risk as their primary concern. “Directors identified the various risks that were most important to their boards with 69 percent identifying reputational risk as the most important. This percentage skyrockets with the addition of their concerns about the elements of reputational risk including IT risk, product risk, outsourcing risk, privacy and data security, and risk due to fraud.”

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