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Board's Role in Strategy, Risk & Resilience
The global marketplace is characterized by rapid change and continuous disruption. As such, companies must understand their goals and objectives and strategize to minimize risk and protect against crises.
While no one can foretell the future, a company operating proactively to identify threats and mitigate vulnerabilities will build resilience to crises.
As part of their function, boards should provide oversight and assist management in strategic development and crisis management. The board’s role in strategy, risk, and resilience must be clearly defined.
What is the Board’s Role in Strategy, Risk, and Resilience?
Boards are increasingly held to account for corporate failures and exposure to risk. Shareholders see risk oversight as a key responsibility of the board. Therefore, it is incumbent on the board to take an active interest in business strategy, building resilience in conjunction with their management team and strategic consultants.
What is Resilience?
Resilience is the speed and agility with which a company is able to resume operations and execute its strategic plan in the face of a crisis. A company exhibiting a high degree of resilience should be able to deliver critical business services and economic functions under adverse conditions and disruptive change.
Comprehensive strategic planning utilizes the SWOT analysis (among other tools) to identify weaknesses and threats to the organization. These weaknesses and threats may be internally or externally driven and should be guarded against by implementing operational protections. While it is not a good expenditure of time for the Board to conduct this exercise, the Board should understand the key outcomes of the SWOT work completed by its leadership team.
More importantly, the Board should be looking for how leadership is addressing key weakness (especially if exacerbated by threats), and if growth priorities are being driven by opportunities that have related supporting strengths and few weaknesses.
Board oversight should support an ongoing assessment of risk to the organization. As leadership addresses risk management, they should implement a core strategy to address systemic risks, negative economic impacts, and business failures resulting from a broad range of threats.
The Resilience Concept
There are three primary facets to building resilience: organizational resilience, cultural resilience, and technological resilience. Boards can support their management teams by overseeing these areas and seeking opportunities for improvement in the team’s risk management approach.
Operational resilience taps into a direct responsibility and function of the board, management succession. By effectively executing its role in succession planning, the board can prepare against unnecessary upheaval to the organization's hierarchy and avoid interruptions to their day-to-day operations.
Corporate culture is defined by a system of values, beliefs, and behaviors that shape how things get done within the organization. Culture is the kingpin of all strategic elements, inspiring unity and initiative toward defined goals.
Boards should be proactive and persistent in supporting management to foster trust and loyalty through transparency, inclusiveness, and empowerment.
Management should engage their workforce in crisis management scenarios and prepare appropriate responses and procedures to such crises.
A reliance on technology increases a company’s risk of operational disruptions. Boards should closely monitor technology activities and guard against potential cyber threats. Boards should look for opportunities to protect essential data and strategize processes to quickly recover cyber-assets in the event of loss.
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Using our Essential Strategy approach, we simplify the planning process, quieting the noise to help you create greater alignment up, down, and across the organization – we know it works because our clients tell us so!
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Board Development Articles
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