With reopening in full swing and the world picking up the pace as 2021 hits high gear, your next board meeting promises discussion on a wide range of critical topics.
From ESG reporting to PCAOB requirements, audit committees, accounting efficiency, workplace safety and technology, it’s critical to ensure your organization is ready for whatever lies just beyond the horizon.
Here are five questions to ask at your next board meeting to ensure you and your fellow board members are doing just that.
1. What is our strategy and plan regarding ESG Reporting in order to meet investor and stakeholder expectations?
Environmental, social and governance, or ESG, reporting shows investors and others outside your organization that you’re committed to taking these issues into account and actively working to make them a part of your core strategies and planning. Further, the SEC recently announced the creation of a Climate and ESG Task Force, forging a path toward stronger efforts in identifying potential violations. That makes your organization’s approach even more critical.
If you’re not communicating your efforts, you’re closing the door to future benefits in the form of growth, access to additional capital, and more.
There are market-driven frameworks you can leverage to ensure you’re communicating your approach to ESG reporting effectively. Make sure you’re aware of them and that the board is assisting the company in taking advantage of accelerating ESG investing.
2. Does the board have an adequate understanding of the various compliance requirements of the organization and how management ensures compliance is achieved?
Modern organizations like yours have myriad compliance issues and requirements that you must effectively manage to be successful. The board plays a key role in providing oversight and emphasizing the importance of compliance across the company. Ask yourself and your fellow board members:
- Does the board feel comfortable in its understanding of the operational, financial, technological and regulatory compliance requirements facing the organization?
- What mitigating factors has management put in place to ensure a compliance is effectively maintained?
- Are the mitigation activities currently in place commensurate with the risk associated with individual compliance requirements?
- Have any relevant compliance requirements for the organization changed in recent periods?
- Has management experienced a failure in compliance? If yes, how was identified and remediated?
3. Are we confident in our approach to audit committees and new PCAOB requirements?
There are new requirements to be aware of from the Public Company Accounting Oversight Board (PCAOB) regarding auditing accounting estimates, including fair value measurements, and the work of specialists.
It’s key that you and your fellow board members understand these requirements and the extent to which they apply to your organization, specifically as they relate to the use of specialists. The effects of the requirements will largely depend on the nature and extent of accounting estimates included in your company’s financial statements, as well.
The requirements are timely, as they take effect as auditors are responding to the effects of COVID-19, making it important for the auditor to understand the methods, data and significant assumptions your company used in developing estimates.
4. Are we asking management and ourselves enough questions about cybersecurity?
Cybersecurity has never been more critical, and its importance is still growing each day as bad actors find new ways to gain access to sensitive information, systems and more. Your board can set the tone for strong preventative practices throughout the organization, but only if you’re informed and committed to aligning your plan to resolve cybersecurity risks with your organization’s overall cyber program. The board of directors, at least the audit committee, should be receiving regular updates from management on cybersecurity efforts and results. Ask questions to understand and ensure that the organization’s cybersecurity program includes appropriate procedures and activity to safeguard your network, applications, and data from external threats as well as ensure that employees are trained and aware of cybersecurity risks. Additionally, activities should be in place to evaluate internal cyber threats, which can be just as damaging as external threats, but many times harder to control and identify.
There are a variety of pertinent questions you can ask to ensure this is the case. Consider whether the information you have regarding risk is complete and, even if it is, whether it’s communicated enough, particularly to and from management. Are you incorporating cybersecurity risk into a more holistic Enterprise Risk Management program? That can pay dividends.
5. Are we still aligned on our company strategy and core objectives?
2020 was a year of significant uncertainty, and many organizations’ top priority was simply to navigate the pandemic and its effects as best they could. Now, however, it’s time to turn an eye back toward the future.
Board members can come alongside your management teams to craft a strategy focused on delivering long-term value in the modern, stakeholder-focused business environment. Redefine financial and non-financial value drivers, encourage management to conduct a thorough analysis of existing operations and potential weaknesses, and ask questions to help ensure that the entire organization is aligned with this refreshed company strategy and outlook. Managerial buy-in and board oversight are critical.
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.
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