The current business environment places greater scrutiny than ever before on the actions and decisions taken by boards of directors. The onus is on all directors to ensure that legal and regulatory responsibilities are met and that decisions taken by the board are always in the best interests of the company.
Boards must be prepared for a range of challenges from anticipating the unexpected and planning accordingly, to managing risk and reputation, whilst continuing to seek and capitalise on opportunities as they arise.
Legal and regulatory responsibilities
Regulation is constantly evolving and directors must keep abreast of any changes in the legal or regulatory environment that may impact upon their organisation, most notably the Companies Act 2014. It is not acceptable for directors or boards to claim that they were not aware of their responsibilities; the onus is on all directors to know and understand their duties.
Expect the unexpected
One of the greatest lessons that boards have learned in recent years is to expect the unexpected. It is the role of the board to challenge executive management, to ask the difficult questions and to anticipate risks to the organisation. When it comes to good governance, it is best to ensure that the i’s are dotted and t’s crossed.
Balancing risk and strategy
The board has a key role to play in ensuring that the strategic direction pursued by an organisation will achieve long-term value, while putting in place appropriate risk management structures and processes to strengthen and protect the organisation. Risk management should encompass everything from operational, strategic and financial risks to risks from the external operating environment.
Stakeholders and sustainability
With a surge in shareholder activism and the dominance of social media, boards need to be cognisant of the impact of decisions upon all stakeholder groups. From executive remuneration, to corporate social responsibility and environmental and sustainability projects, organisations are publicly answerable for many more policies pursued than ever before.
Communication is integral to how a company creates and protects its reputation, how it grows and how it manages that growth. The strategy that an organisation pursues will have an influence on its corporate reputation and so directors must be mindful of the consequences, unintended or otherwise, of decisions taken at board level. The tone and culture of an organisation comes from the top.