Survey finds risk management key to better governance

In the wake of severe economic turmoil and increased regulatory pressure, it seems that boards are now more concerned about one thing: good governance.

A recent Thomson Reuters survey reveals that nearly 70 percent of governance professionals are going beyond traditional board materials and seeking competitors’ insights, financial analytics and industry information – an unprecedented move, indeed. The reason? The Thomson Reuters Annual Board Governance Survey found that a quarter of boards are not fully immersed in risk management processes due to the significant pressures associated with reviewing a vast number of board materials.

Since regulators are now zeroing in on risk management practices and are holding the board more accountable as well, companies need to respond. Brian Barnier, principal, ValueBridge Advisors, believes that corporate secretaries should engage the CFO to help the board manage different types of risk. ‘The CFO can assist in blending risk reporting with regular performance communication, which would save the board and management some time in providing more actionable insights. Now is the time to add expertise– not when a public debacle happens, or an activist investor or regulator is challenging the board for more information.’   

For the sake of accountability and transparency, corporate secretaries and the general counsel are now tasked with integrating more information into board books in an effort to promote better governance practices. As it stands, organizations prepare an average of 92 board books annually, with each an average of 116 pages.  This amount to over 10,000 pages per year, which represents a 50 percent increase from the average of 5,940 pages reported the prior year, the report states. Some companies, however, now produce close to six board books per week. 

The Thomson Reuters survey polled more than 125 corporate secretaries and general counsel across a wide variety of industries and geographic locations. In addition to the above, additional key findings include:  

• Risk oversight by boards varies substantially. Nearly 25 percent of respondents state that their boards fail to effectively engage in risk oversight.  

• Almost half of the respondents claim that they never encrypt their board materials. Meanwhile, 18 percent indicate that they occasionally encrypt their information. 

• Only 30 percent of respondents are certain that board members destroy all copies of board-related emails and documents in accordance with the company’s document retention policies. 

• Over 50 percent of the respondents reveal that they have encountered situations where board members left sensitive documents in public places or had heard of instances of sensitive board materials being left out in the open.