Manage the risk (Part 1 of 3)

November 24th, 2013

Christmas (yep not long now) & New Year are a great time to reflect on the year that was & what’s coming for the next. So while you may be starting to plan at an operational level don’t forget the governance side of your business.

Governance is about managing risk, thinking strategically & taking more of a helicopter view of your business. If you’re not familiar with governance check out this link . So at a practical level what are some things to think about as the year comes to an end?

While a business has a business plan to guide direction, I always suggest that directors have a set of Policy Statements that help guide their direction. It’s no good just talking about governance, it needs to have a practical application in the business.

So the next three articles are going to look at these practical applications.

Here are some practical things that directors should be thinking about reviewing this time of year.

1.   Non-Executive Directors or Advisory Board Members
2.   Board Performance
3.   Board Strategic Review
4.   Insurance Risk
5.   CEO Succession Plan
6.   Business Continuity Plan
7.   Health & Safety
8.  Emergency Response Plan
9.  Business Plan
10. Budgets & Cashflows
11. Financial Management Reporting
12. Capex / Opex
14. AGM

This article will look at items 1-5

1.   Non-Executive Directors or Advisory Board Members
2.  Board Performance
3.   Board Strategic Review
4.   Insurance Risk
5.   CEO Succession Plan

Non-executive Directors or Advisory Board Members

If you have independent advice in your business well done. An outside view always brings a different perspective & challenges the business owner & helps with accountability. But just because someone is in that role doesn’t mean you shouldn’t review their role. Is the person appointed suitable, do they still add value & do you still enjoy working with them?

Board performance

If you have a Board of Directors or Advisory Board you might want to consider each year:
• Is the Board still delivering on the purpose it was set in place
• Is it setting the vision
• Is there a clear division of responsibility between management & governance
• Is the Board meeting stakeholder expectations
• What external views are sought
• Is the Board role clearly defined
• Does the Board regularly review its performance
• Is the Board managing the risk of the business
• Is the Board managing the financial position of the business

(Don’t be put off by the terms ‘Board of Directors’ or ‘Advisory Board’. Even if you don’t have this structure, you still need to be thinking of the more strategic view of your business.

Board strategic review

While the business plan guides the operational side of the business the Board should consider the strategic direction of the company. Does the strategy look to achieve the best outcome for shareholders? Is it looking to the future, dealing with immediate issues, monitoring compliance, reviewing key indicators & identifying any skills or succession planning that is needed?

Insurance risk

An annual review of insurances should take place to ensure that any cover in place is suitable to how the business currently operates. It may be that senior management review with the appropriate broker/insurer & provide to the Board an assessment of what is covered & not covered & any recommendations.

CEO succession plan

Don’t wait until the CEO is no longer able to work in their role & wonder what to do next. Part of the Board’s role is to be prepared for this risk & have a contingency in place should the unexpected happen.

As you can see good business practices don’t just happen by chance. But if you take the time to look at your business from a different perspective you’ll be pleased by the results you can deliver.

The next article will look at items 6-10 above.

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