Maureen Bujno, managing director and audit & assurance governance leader for Deloitte & Touche LLP, believes that the first step in mitigating risk for a board is actually quite simple. It involves the procurement of two very basic tools: a pen and a notepad.
“The first thing you should do is talk about and document the top 10 or 15 risks to your company,” says Bujno. “What could really disrupt the strategy of the business? What’s on the mind of your CEO? What’s keeping the CEO up at night?”
According to Bujno, two things she brings up most often when speaking to boards are risk oversight and risk management. They are aspects that are constantly evolving in a time of rapid changes. Among the factors that are bringing challenges to private company boards, she lists economic uncertainty, the geopolitical environment and accompanying supply chain risks, cyber and AI.
“Things are happening very quickly,” says Bujno. “There’s a lot going on outside the organization. At the heart of good risk management is the deliberate conversations that management and the board have about identifying the most important risks to your company.”
Risk, of course, is a word that can have a negative connotation. But, to Bujno, the positive thing about talking about risk as a board is that it unveils opportunities that you might not see if you were to keep your head in the proverbial sand.
“I don’t want to leave you thinking that it’s just negative risk and risk management,” she says. “Because when you start talking about some of these risks, it can become an opportunity. I often talk about competitive risk, because if you’re talking about what competitors are doing, there may be an opportunity to take advantage of something that could grow your business.”
The ability to take advantage of opportunities is enhanced when you practice good governance, a point that is especially important for private companies that are not beholden to the same structures as their public company counterparts. Bujno says it is important for private company boards to closely monitor their board composition.
“Who’s on your board? This question is at the heart of good governance,” says Bujno. “It involves thinking about whether you have the skills and experience around the table to advise on your strategy and considering whether questions around innovation are being asked from an outside-in perspective.”
As it pertains to committee structure, Bujno notes that private company boards are not required to have committees … a fact that perhaps makes it of utmost importance that they actually have them in place.
“There are so many topics and risks to consider,” says Bujno. “Because of the wide-ranging considerations, having specific committees do deep dives on topics or risks can be helpful. An audit or finance committee, a compensation or talent committee; you should ask whether you have the structure in place to support the topics that need to be discussed.”
And since we began with the basic instruments of the pen and the pad, let’s close with another basic of the committee, one that Bujno says is important for private company boards to run effective meetings and that gets to the heart of identifying risk and helping companies thrive: the board meeting pre-read.
“If you have a good pre-read and it spells out the story, when management comes into the meeting to present, the board shouldn’t need to flip through the presentation. Rather, the time should be used for a discussion. ‘Here are the three things I want to talk to you about, and let’s have a dialogue.’ That dialogue with management is really where the board can add value.”