3 - Blog - Global Risk Community2024-03-29T08:10:51Zhttps://globalriskcommunity.com/profiles/blogs/feed/tag/3Board Excellence 101: Your Guide to Building A Forward-looking Boardhttps://globalriskcommunity.com/profiles/blogs/board-excellence-101-your-guide-to-building-a-forward-looking2020-03-23T06:00:00.000Z2020-03-23T06:00:00.000ZJoseph Robinsonhttps://globalriskcommunity.com/members/JosephRobinson808<div><p>The amount of time the <a href="https://flevy.com/business-toolkit/board-of-directors">Board of Directors</a> spend on their work and commit to strategy is rising. Directors say they dedicate more time now<a href="http://flevy.com/blog/wp-content/uploads/2020/01/pic-1-Board-Excellence-Primer-300x200.jpeg" target="_blank"><img src="http://flevy.com/blog/wp-content/uploads/2020/01/pic-1-Board-Excellence-Primer-300x200.jpeg?profile=RESIZE_710x" width="300" class="align-right" alt="pic-1-Board-Excellence-Primer-300x200.jpeg?profile=RESIZE_710x" /></a> to their Board duties than ever before. In fact, since 2011, the directors have cut in half the gap between the actual and ideal amount of time they spend on Board work.</p><p>In the newest <a href="https://www.mckinsey.com/featured-insights/mckinsey-global-surveys">McKinsey Global Survey</a> on <a href="https://flevy.com/business-toolkit/corporate-board">Corporate Boards</a>, the results showed that strategy, on average, is the main focus of many Boards. Yet, directors still want more time for strategy when they consider their relative value to their companies. This is more than any other area of the Board work.</p><h3><strong>The Evolving Trends Influencing Board Work</strong></h3><p>In recent years, the amount of time the Board of Directors spends on Board work has increased. Compared to 2011, directors now spend five more days per year on Board work. Another trend that is happening is the increase in time. As the number of days has grown, so has the amount of time spent on strategy.</p><p>Based on the survey, a total of 772 days was spent on Board work in 2013. This has increased to 1,074 in 2015. Subsequently, 8.91% was spent on strategy in 2015 compared to 7.85% in 2013. With an increased focus on strategy, directors are dedicating more time on <a href="https://flevy.com/strategic-planning">Strategic Planning</a> and to discuss strategic issues.</p><p>In the next three years, directors would like to dedicate more time to <a href="https://flevy.com/browse/stream/strategy-development">Strategy Development</a> and on organizational health and talent management. Directors want to increase the time spent on strategy due to its relative value to their companies.</p><h3><strong>The 3 Types of Boards</strong></h3><p>Performance of Boards based on overall impact, performance, and operation showed that there are <a href="https://flevy.com/browse/flevypro/board-excellence-primer-3995">3 types of Boards</a>.</p><p><a href="https://flevy.com/browse/flevypro/board-excellence-primer-3995" target="_blank"><img src="http://flevy.com/blog/wp-content/uploads/2020/01/Pic-2-Board-Performance-Excellence-1024x768.png?profile=RESIZE_710x" width="750" class="align-full" alt="Pic-2-Board-Performance-Excellence-1024x768.png?profile=RESIZE_710x" /></a></p><ol><li><strong>Ineffective</strong>. Ineffective Boards report the lowest overall impact and non-performance of tasks. They have the lowest overall impact on long-term value creation. Ineffective Boards are least effective at the 37 tasks required of the Board and they do not execute some of the tasks at all. Only a few are found to be effective at any one task.</li></ol><ol start="2"><li><strong>Complacent</strong>. Complacent Boards have a much more favorable view of their over-all contributions. Half of the directors considered their Board having a very high impact on long-term value creation. Complacent Boards have been found to be effective in the performance of tasks on management review of financial performance, setting the company’s overall strategic performance, and formally approving the management team’s strategy.</li></ol><ol start="3"><li><strong>Excellent</strong>. Excellent Boards are the most well-rounded of the 3 types of Board of Directors. Their overall impact is very high. Significantly, they project greater effectiveness in the performance of tasks than peers on every single task. Further, they are effective in strategy and performance management.</li></ol><h3><strong>Achieving Board Excellence: What Does It Take</strong></h3><p>Those <a href="https://flevy.com/browse/flevypro/board-excellence-primer-3995">boards that reach Excellence</a> are found to be effective at 30 of the 37 tasks undertaken by the Board. Compared to others, they stand out in the ways they operate. They have an especially strong culture and mechanism for feedback. They are more than twice as likely to conduct regular evaluations and ask for input after each meeting.</p><p>While this may sound daunting, achieving a value-creating Board is achievable. There are just fundamental principles that the Board needs to follow to achieve Board Excellence. One of these guiding principles is spending more time. Across-the-board increases are often achieved with more time spend on Board work.</p><p>Interested in gaining more understanding of <a href="https://flevy.com/browse/flevypro/board-excellence-primer-3995">achieving Board Excellence</a>? You can learn more and download an <a href="https://flevy.com/browse/flevypro/board-excellence-primer-3995">editable PowerPoint about <strong>Board Excellence</strong> here</a> on the <a href="https://flevy.com/browse">Flevy documents marketplace</a>.</p><p><strong>Are you a management consultant?</strong></p><p>You can download this and hundreds of other <a href="http://flevy.com/pro/library/frameworks">consulting frameworks</a> and <a href="http://flevy.com/pro/library/consulting">consulting training guides</a> from the <a href="http://flevy.com/pro/library">FlevyPro library</a>.</p></div>Basel Committee Ushers in Next Phase of Enterprise/Integrated Risk Managementhttps://globalriskcommunity.com/profiles/blogs/basel-committee-ushers-in-next-phase-of-enterprise-integrated2013-08-29T13:06:53.000Z2013-08-29T13:06:53.000ZSecondFloorhttps://globalriskcommunity.com/members/SecondFloor<div><p>The Basel Committee, which creates regulations for banks, has published a set of principles regarding effective risk data aggregation and risk reporting, which will provide a fantastic business case for risk professionals to improve their risk frameworks. I’ve included highlights below, but you can take a look at the full report<a href="http://www.bis.org/publ/bcbs239.pdf" target="_blank"> here.</a></p><p>The principles for effective risk data aggregation and risk reporting will be mandatory for globally systemically important banks (G-SIBs) from 2016, and the Basel Committee recommends that national regulators make them mandatory for domestically systemically important banks (D-SIBs). There are currently 29 G-SIBs, and D-SIBs will probably be the top four or five largest and/or most complex banks in each country. Beyond this, I believe the principles in the Basel document will become an industry standard by which all banks will be assessed by institutional investors and during due diligence processes for mergers and acquisitions.</p><p><strong>The Basel Committee’s principles cover four closely related topics, and are common sense, though not easily attainable: </strong></p><p>• Overarching governance and infrastructure </p><p>• Risk data aggregation capabilities </p><p>• Risk reporting practices </p><p>• Supervisory review, tools and cooperation </p><p>A couple excerpts from the report that will resonate with most practitioners explain why the principles are necessary. These explanations will come in handy as ‘I-told-you-so’ introductions to many a business case for the next steps in enterprise/integrated risk management frameworks and in business analytics at group level (because it’s ultimately the board and senior management that own this challenge):</p><p>• Ensure that management can rely with confidence on the information to make critical decisions about risk.</p><p>• Accurate, complete and timely data is a foundation for effective risk management. However, data alone does not guarantee that the board and senior management will receive appropriate information to make effective decisions about risk. To manage risk effectively, the right information needs to be presented to the right people at the right time. Risk reports based on risk data should be accurate, clear and complete. They should contain the correct content and be presented to the appropriate decision-makers in a time that allows for an appropriate response.</p><p><strong>Other elements within the principles that point to some solid professional challenges are:</strong></p><p>• Supervisors observe that making improvements in risk data aggregation capabilities and risk reporting practices remains a challenge for banks, and supervisors would like to see more progress</p><p>• These risk reporting capabilities should also allow banks to conduct a flexible and effective stress testing which is capable of providing forward-looking risk assessments</p><p>• When expert judgment is applied, supervisors expect that the process be clearly documented and transparent</p><p>• A bank’s board and senior management should promote the identification, assessment and management of data quality risks as part of its overall risk management framework.</p><p>• A bank’s risk data aggregation capabilities and risk reporting practices should be fully documented and subject to high standards of validation.</p><p>• Capabilities to incorporate new developments on the organisation of the business and/or external factors that influence the bank’s risk profile</p><p>• Risk management reports should accurately and precisely convey aggregated risk data and reflect risk in an exact manner. Reports should be reconciled and validated</p><p>The Basel principles for effective risk data aggregation and risk reporting might not look 100% practical for inclusion in the real world, as opposed to a wish-list paper exercise, but at SecondFloor we believe it creates the right mindset.</p><p><strong>The list of globally systemically important banks</strong>, it is created by the Financial Stability Board, and can be found at: <a href="http://www.financialstabilityboard.org/publications/r_121031ac.pdf">http://www.financialstabilityboard.org/publications/r_121031ac.pdf</a>. This latest list was created in Nov 2012 and will be updated again in Nov 2013.</p><p><strong><a href="http://info.secondfloor.com/ContactUs.html" target="_blank"><span>For more about SecondFloor’s solution for efficient analytics and critical and regulatory reporting, and how it can help with integrated risk management contact SecondFloor today.</span></a></strong></p><p><span> </span></p></div>