What Boards Worry About -- A Survey From Eisner Amper

Concerns about risks confronting boards is an interesting survey from the law firm of Eisner Amper LLC. They obtained responses from 142 directors, of whom 31% served on the audit committee.

Highlights include:

  • Their top-rated risk area was reputational risk. However, damage to reputation can come from a variety of areas, so while this is interesting it is hard to make something of. Personally, I wish they were more concerned about the adequacy of their risk management process — more on this later.
  • “Directors are facing more complex business issues than ever before, all of which require additional research on their part to stay abreast of risks and opportunities.”
  • “IFRS and its ultimate timeline is [sic] not clearly understood. Comments from the SEC support this with their concerns about understaffing and the new requirements under Dodd-Frank.”
  • “Growth is top of mind for the boards …. 41 percent of the represented boards engaged in strategic discussions on the topic. This does not seem significant if it were not for the low amount of respondents focused on growth from last year’s survey at only 16 percent.”
  • “2011 suggests a back to basics return to growth strategies for further company sustainability. Status quo will not do.”
  • “More than 50 percent of the directors feel that their CEOs have a strong understanding of broad-based risk assessment (87 percent)”. My comment on this is that most of the 87% are wrong. It is hard for directors to assess how well CEOs understand ERM when so few directors understand ERM!
  • Privacy and data security is only ranked by 44 percent of the directors surveyed as an area of strong understanding by the CEO. This highly ranked risk of concern to boards warrants additional time and attention by the entire C-Suite given its potentially huge affect on reputation and brand in the event of a breach of personally identifiable information. The directors also noted relatively low numbers for the level of knowledge of their CEOs for IFRS and tax changes."

Without apology, I will say again that I wish more directors and boards were concerned about the adequacy of (a) their enterprise-wide risk management program, and (b) the availability of reliable, current, timely, and useful information for management and the board to use as a basis for decisions.

What would you like the board to focus on as a priority? Do they?

Posted on Aug 15, 2011 by Norman Marks

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  1. I found figure 12 interesting.  Many different priorities, but the Board wants more information on ERM

  1.  Reputation is everything in a world where social networking is the way word gets spread around so they're certainly right about that one.

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