Asking the Right Questions at Your Next Board of Directors Meeting

Much is in flux as 2021 dawns – most notably, the first two COVID-19 vaccines have been approved for emergency use, meaning there may be some end in sight to the pandemic that has so dramatically altered the course of life and business for the better part of a year.

However, there are still a variety of emerging risks on the horizon. The period of transition back to “normal” life will require careful navigation of those risks as well as a thorough understanding of your organization.

At Weaver, we know risk – that’s why we’ve continued to compile our series of key questions and central topics you can carry into your next board meeting to engender robust and productive discussion.

The following five questions will serve as your guide for your board meeting, helping you ensure your organization is ready to adapt to what the next year will bring.

1. How are we planning for emerging risks in the year ahead?

The IIA recently released its “OnRisk 2021” report outlining what the organization views as the top 11 risks as 2021 dawns, and your organization can kick off discussions by examining how well you are prepared to deal with each risk.
In particular, board meetings offer a chance to hear the perspectives of disparate leaders in your organization on the significance of different risks and to get those perspectives more aligned and in step with a holistic plan for agility in the face of all 11 risks.

The IIA surveyed c-suite executives, board members and chief auditors to develop this year’s list. The risks were, in order – cybersecurity, third party, board information, sustainability, disruptive innovation, economic and political volatility, organizational governance, data governance, talent management, culture, and business continuity and crisis management.

You can ask a few key “sub-questions” to help guide discussion regarding emerging risks. These might include how your organization’s third-party risk management program has been disrupted this year, what’s expected to change in 2021, and how risks are being discussed among different parties in board meetings.

Effective risk management requires that you not only consider and develop risk monitoring and mitigation activities now, but also that you make the constant evaluation of those strategies a key priority throughout the year.

2. What new considerations or assumptions were modified by management in the 2021 budgeting process?

As part of its oversight and governance role, the board is responsible for reviewing the company’s annual budget. High levels of uncertainty in the current business climate have made the budgeting process even more difficult for management.

Prior to approving, the board should understand:

  • What changes were made in the budgeting process for 2021, compared to prior years?
  • What is management’s confidence level with the budget presented and where do they think it may be a stretch, high or low?
  • Are there new initiatives or investments planned in the upcoming year and how were they evaluated?
  • What other goals has the company set for the short-term and does the budget support these goals?

3. What implications do the results of the presidential election have on your organization?

It goes without saying that the transition from President Donald Trump to President-Elect Joe Biden brings implications across the business landscape. It’s past time to begin identifying how these implications and potential changes may affect your organization.

In particular, Biden’s presidency is likely to bring renewed action in the face of the COVID-19 pandemic in terms of restrictions and safety mandates, a renewed U.S. commitment to battling climate change, , and a different approach to labor relations. All these changes could have a tremendous impact on your organization.

It’s critical to examine your organization’s structure and plans of action to ensure that you have a trusted source of information on key policy initiatives, laws and regulations. You may also ask management to evaluate economic scenarios, such as the implementation of another stimulus plan, to understand how the organization might need to respond.

4. What is your organizational response to a workforce in transition?

2021 will offer the first real test of longer-term workforce and infrastructure strategies put into place to combat the pandemic and empower a more agile, remote organization.

It’s key, then, that your board ask meaningful questions about how your organization is evaluating, adjusting and supporting that new infrastructure to ensure that you are  getting the most out of your company at every level. Your meeting provides an opportunity to assess how effective your business continuity planning was in the face of the pandemic, how agile your IT infrastructure and support were, and what updates might be necessary based on the needs identified throughout the year.

The three key areas of governance, infrastructure and monitoring deserve attention. By focusing on these areas, you will help  organization to more effectively approach the governance of processes, build out a robust infrastructure for a hybrid workforce, and stay on top of important needs and changes as they arise.

5. Is the organization’s approach to drafting and issuing earnings guidance effective?

The SEC and popular U.S.-based stock exchanges already impose certain requirements for audit committees to discuss financial statements and earnings press releases and make recommendations on the annual Form 10-K. But that doesn’t mean your organization’s approach to disclosures is comprehensive. Audit committee meetings are a great place to discuss how earnings guidance is being developed.

Here are a few key questions you can ask to help sharpen your organization’s approach:

  • What feedback or questions has management received in the past from agencies and analysts on your earnings releases and guidance?
  • Do your press releases contain developments or updates on business activities that the board is unaware of or hasn’t discussed?
  • When did management last evaluate its approach to earnings guidance? Do current circumstance warrant evaluation and change?
  • How can pressures to meet short-term expectations affect the quality of overall reported financial results and management behavior?
  • How do your competitors approach earnings guidance and other forward-looking information? What can you learn?

Weaver offers information and insights to prepare for your next board meeting. We can help you ask the right questions and determine appropriate plans of action based on topics and trends as they unfold. Subscribe to our monthly insights for articles and information to help you review your organization’s operations and prepare for change in an uncertain world.

© 2021

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John Wauson

John Wauson

Partner-in-Charge, Risk Advisory Services

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John Wauson, CPA, has 14 years of public accounting and risk advisory experience. With a dedication to client service, John…

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