Boards of directors are exposed to a wider range of risks and carry more accountability than they did only a decade ago, according to a recent webinar hosted by the directors’ body Ecoda “Mitigating risks at board level”.
The speakers agreed that boards’ exposure to risks now goes beyond traditional financial risks and includes those related to privacy, climate change and cultural issues, such as the #MeToo movement. New sets of liability rules for supervisory board members are emerging worldwide, which has led to a common set of expectations and a common approach to accountability, they said.
Those on the panel, Kevin LaCroix (Vice President at RT ProExec), Noëlle Lenoir (Partner, Kramer Levin Naftalis) and Noona Barlow (Head of International Financial Lines Claims at AIG), agreed that with many companies operating globally, it is not only the scope of risks that is growing but also the exposure to multi-jurisdictions. In that context, board members must anticipate possible severe crises, almost having to operate as risk managers and closely review an organisation’s risk mapping.
Directors should ask for, and benefit from, periodic compliance training based on real life examples, the speakers said. Board training is key to providing full awareness of directors’ duties and the legal implications of not complying. Many organisations were turning to chief compliance officers within the company as best practice. Having an open culture in organisations where people could speak up without fear of reprisals was also seen as important.
“Boards that have developed strong and proactive relationships with their heads of internal audit have been able to keep abreast of this wider range of risks more readily,” Farid Aractingi, ECIIA President, said commenting on the webinar discussion. “Internal audit’s position in the third line of defence gives it an overview of all of the risks a business faces and it can quickly identify control weaknesses and gaps in assurance where they arise. Many heads of internal audit are now seen as trusted advisers on risk to the board.”
Participants were invited to take part in a poll showing what risks are of most concern for their board. Data security (69%) was the most frequently cited issue followed by corruption and bribery (25%), competition and antitrust issues (25%), privacy (19%), climate change (13%) and health issues (9%). Panellists expressed surprise that corruption and bribery did not receive a higher score and that “#MeToo” type concerns were not cited at all.