The Board’s Role in Risk Management & Restructuring a Fraternal

THE BOARD’S ROLE IN RISK

MANAGEMENT

Alex Todd presenting to:

Toronto Police Widows & Orphans Fund

GovernanceCommittee.com

WHAT IS THE PURPOSE OF CORPORATE

GOVERNANCE?

WHY DO WE NEED CORPORATE BOARDS?

WHAT SHOULD CORPORATE BOARDS DO?

Profit

Risk Management

Collaboration

Leadership

Sustainability

BUSINESS

Golden

WHAT’S THE DIFFERENCE BETWEEN RISK AND

UNCERTAINTY?

Risk Management Innovation

WHAT ARE THE EXPECTED OUTCOMES OF RISK

AND UNCERTAINTY?

HOW CAN BOARDS CREATE VALUE?

GovernanceCommittee.comGovernanceCommittee.com

Tactical Risk

Price gouging

Strategic Risk

Premium brand

Systemic Risk

Externalizing risk

Profiteering

High profit margins

Economic bubble

Tactical Uncertainty

New market

Strategic

Uncertainty

New offering

Systemic

Uncertainty

New business

Revenue growth

Competitive advantage

New value

HOW MUCH VALUE IS REQUIRED?

Global Business/ Societal Innovator*

Global Industry Structure Innovator

New Business Model Innovator

New Product, Service Market

Innovator

Process Innovator

Safety

Value Potential

Belonging

Esteem

Actualization

Harmony

Horizon

Maturity

* Levels of Work labels (Van Clieaf and Kelly, 2005, p.

HOW DO WE KNOW THE BOARD IS ACCEPTING

APPROPRIATE RISKS TO CREATE REQUIRED

VALUE?

Ad hoc

•Undocumented; in a state of dynamic change; depends on individual heroics

Preliminary

•Risk defined in different ways and managed in silos. Process discipline is unlikely to be rigorous.

Defined

•A common risk assessment / response framework is in place. Organization-wide view of risk is provided to executive leadership. Action plans implemented in response to high priority risks.

Integrated

•Risk management activities coordinated across business areas. Common risk management tools and processes used where appropriate, with enterprise-wide risk monitoring, measurement and reporting. Alternative responses analyzed with scenario planning. Process metrics in place.

Optimized

•Risk discussion is embedded in strategic planning, capital allocation, and other processes and in daily decision-making. Early warning system to notify board and management to risks above established thresholds.

Source: Measuring the Maturity of Risk

Management – Marks on Governance, March 29,

HOW DO WE KNOW THE BOARD HAS THE

CAPACITY TO OPTIMIZE RISK-ADJUSTED VALUE

CREATION?

Principle 1

Ensuring the Basis for an Effective Corporate Governance Framework

Principle 2

The Rights of Shareholders

and Key Ownership Functions

Principle 3

The Equitable Treatment of Shareholders

Principle 4

The Role of Stakeholders in

Corporate Governance

Principle 5

Disclosure and Transparency

Principle 6

The Responsibilities

of the Board

OECD Principles of Corporate Governance

Thank You

RESTRUCTURING A FRATERNAL FOR THE

21ST CENTURY AND BEYOND

Alex Todd presenting to:

Toronto Police Widows & Orphans Fund

WHAT ARE THE PRIMARY CONSIDERATIONS?

Innovator

Process Innovator

Value Potential

* Levels of Work labels (Van Clieaf and Kelly, 2005, p. 5)

HOW DOES THE BOARD ADD VALUE TO

MANAGEMENT?

Innovator

Process Innovator

Value Potential

CEO’s Level of

Governance

Level of

Cognition

Hierarchy

NetworkMarket

Hierarchy

NetworkMarket

Horizon

HOW DOES THE BOARD KNOW IT IS MAKING

VALID DECISIONS?

Innovator

Process Innovator

Value Potential

Stakeholders

Hierarchy

NetworkMarket

Hierarchy

NetworkMarket

HOW DOES A BOARD ENSURE THE BUSINESS IS

SUSTAINABLE?

Innovator

Process Innovator

Value Potential

Hierarchy

NetworkMarket

Hierarchy

NetworkMarket

Empowerment Risk Transference

Adaptive

Capacity

HOW DOES THE BOARD ASSESS THE VALUE OF A

Strategic Stakeholders

Customers Investors Various Various

HOW CAN WE STRUCTURE THE CORPORATE

GOVERNANCE SYSTEM?

Shareholders

/ Members

Board of Directors

Employee

GOVERNANCE SYSTEM?

Shareholders

/ Members

Board of Directors

Employee

Supervisory Board

/ Member Council

GOVERNANCE SYSTEM?

Shareholders

/ Members

Board of Directors

Governance

Board*

Stakeholder

Congress*

Employee

* Terms from Shann Turnbull’s Network

Governance

GOVERNANCE SYSTEM?

Board of Directors

Employee

Senate*

Shareholders

/ Members

Governance

GOVERNANCE SYSTEM?

Board of Directors

Employee

Senate*

(Watchdog Board)

Shareholders

/ Members

Stakeholder

Congress*

Governance

HOW DO THESE CONSIDERATIONS

CORRESPOND WITH BEST PRACTICES?

Innovator

Process Innovator

Value Potential

Hierarchy

NetworkMarket

Hierarchy

NetworkMarket

Empowerment Risk Transference

Stakeholders Cognition

OECD Principles:

• #1- Ensuring the Basis

for an Effective

Framework

• #6 - The

Responsibilities of the

OECD Principles:

• #4 – The Role of

Stakeholders in

• #5 - Disclosure and

Transparency

OECD Principles:

• #2 - The Rights of

Shareholders and Key

Ownership Functions

• #3 - The Equitable Treatment

of Shareholders

Thank You

The Board’s Role in Risk Management & Restructuring a Fraternal

Business

Transcript of The Board’s Role in Risk Management & Restructuring a Fraternal

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