Managing Governance Risks | Liz Lynkswiler, Company Secretary, Brightwell Pensions
Risk identification, ownership, and monitoring sit at the highest levels of organisations and are the ultimate responsibility of a firm's board of directors. We hear much about ESG but focus on the E and S acronyms, i.e., 'environmental' and 'social' aspects. However, risks arising from the 'G' – governance – should be at the forefront of directors' minds. But what do we mean by the term governance risk, and how can it be effectively managed? In this podcast, Dr Sabine Dembkowski, Founder and Managing Partner of Better Boards, discusses managing governance risk with Liz Lynxwiler, Company Secretary at Brightwell Pensions. "One of the key governance risks is around decision making"Liz explains that the first step is to define what governance risk means for your organisation. In her experience, one of the key governance risks is decision-making and unclear roles and responsibilities. One of the main benefits of a robust governance structure is to ensure that boards maintain sufficient oversight of management and the business's day-to-day activities. Boards need to ensure the right controls are in place to mitigate the likelihood of any risk developing, and governance professionals, in particular, act as one of the most important controls around governance risk. "It's very easy to hide key information in a 30-page paper"Liz believes that one of the key things is the natural information asymmetry between the board's non-executive and executive directors. A non-executive by proxy is not involved in the business's day-to-day activities, so they need to lean on their governance teams to ensure management information provided for meetings is on time, clear and concise. "Board Papers are a sticky issue, regardless of how much is written about them"Every company secretary and director Liz speaks to agrees that board papers are a key issue. Simple things like executive summaries are key. Brightwell has done a lot of Report Writer training and treats the executive summary as an elevator pitch with only a minute or two to get key points across. They also take time at the end of meetings to reflect on the meeting itself and the management information. "In reality, the risks are owned by everyone"Liz believes that governance risk is one of those rare risks jointly owned between the first line and the board. In the division of responsibilities, executive management should monitor and manage the risks regularly and escalate them as appropriate. "It's our responsibility as governance professionals to monitor what the board needs and to work with the business to make that happen"Liz explains that sometimes there will be topics that need training on, particularly areas around corporate governance changes, but governance professionals act as a facilitator between the business and the board. The three top takeaways from our conversation for effective boards:1. Be open. Feedback is the breakfast of champions, and sometimes it can be difficult to receive feedback on processes or ways of working that the business has spent a long time building up. But one of the best ways to build trust and strong relationships with the board and other stakeholders is to really listen and take action on areas that might need improvement. 2. Don't shy away from being bold. If there is an opportunity to be more efficient, take it. Just make sure there are clear parameters and adequate checks and balances around any delegations. 3. Trust your governance professionals, who are there to give boards and management impartial advice on how best to maintain the integrity of the governance framework.