5:30 p.m. - 6:00 p.m. Networking, Cocktails, Full Buffet Dinner
6:00 p.m. - 7:30 p.m. Program & Dessert
Existing enterprise risk management (ERM) approaches may no longer be sufficient to address risks that are complex, less well-known or highly disruptive to business. And the traditional ERM identification and tracking methodologies may be insufficient to address this new risk environment. Attendees left this program with practicable tools to help their board—
Identify and assess risks through a different lens
Calibrate the effectiveness of your company’s enterprise risk management, tracking and mitigation
Anticipate new developments as the risk environment continues to evolve
Capitalize on those risks that can be converted to opportunities
Improve the quality of engagement and discussion of risk
Attendees received a copy of October 2018 NACD’s Blue Ribbon Commission Report, “Adaptive Governance: Board Oversight of Disruptive Risks.”
DISCUSSION SUMMARY AND KEY TAKEAWAYS
HERE'S WHAT YOU MAY HAVE MISSED
Existing enterprise risk management (ERM) approaches may no longer be sufficient to address risks that are complex, less well-known or highly disruptive to business. And traditional ERM identification and tracking methodologies may be insufficient to address this new risk environment. Our April 18th program, Seeing Around Corners: Is Your Board Ready for Disruptive Risks & Opportunities, took place at the Manor in West Orange, NJ and focused on how Boards should think about disruptive risks. The program was moderated by Andrea Bonime-Blanc, founder and CEO of GEC Risk Advisory, a strategic governance, risk, ethics and cyber advisory firm, and included director panelists: Maureen Breakiron-Evans, a former Audit Partner and CFO who currently serves on the Boards of Cognizant Technology Solutions, Ally Financial and Cubic Corporation; Kelly J. Watson, a recently retired KPMG audit partner, serving on its Board of Directors from 2013-2018 and its lead director during 2018; and Matthew J. Espe, a former CEO of both publicly-traded and privately-held companies and who currently serves on the Boards of WESCO International, Realogy Holdings, Foundation Building Materials, Inc. and Cenveo Corporation. Ms. Breakiron-Evans and Ms. Watson served on the NACD’s Blue Ribbon Commission that produced the report in October 2018, captioned “Adaptive Governance: Board Oversight of Disruptive Risks.”
High points of the program are summarized below.
The program included an overview of disruptive risks, highlighting key points from the World Economic Forum Global Risks Report 2019 and the NACD report on Disruptive Risks, including the NACD Blue Ribbon Commission’s recommendations on how Boards can address disruptive risks. All participants were provided with a copy of the Blue Ribbon Commission report.
The initial discussion was centered on what constitutes a “disruptive risk” with much of the discussion focusing on the Blue Ribbon Panel’s view that the focus is on the “impact” of the disruption, with risks such as weapons of mass destruction, extreme weather conditions, and natural disasters ranking at the top of the World Economic Forum’s Global Risk Report of most impactful risks.
It was emphasized that impactful risks can be those that are known or unknown, internal or external, or more or less likely to occur.
The panelists further emphasized that there is an increasing interconnectivity of risks and often impact is driven by the simultaneous occurrence of several risk events (e.g., FCPA event that triggers changes in executive management). Boards are moving away from a traditional “risk heat map” analysis to a dynamic risk assessment that considers the potential impact of a cluster of risks rather than the more traditional focus on a particular risk. Also disruptive risks obviously vary from company to company (e.g., the potential of a avian flu epidemic in the mid-2000s was less critical to a manufacturing company than a health insurance company).
Critical to any ability to address risks at the Board level is culture – starting with the tone set at the top of the organization, the transparency and candor of discussions in the Boardroom between the CEO, other members of management and the Board, and the access that Board members have to others within the organization. It was also emphasized that foundational ethics, performance management and talent development programs are critical to foster a positive culture.
The panelists emphasized practical considerations that can improve a Board’s ability to address disruptive risks, including: the selection of directors to ensure there is a broad diversity of thought on the Board, the critical need for respect and cohesion among Board members to permit frank and honest discussions, agenda setting to provide sufficient time to focus on strategy and risk, and the use of outside speakers and advisors to inform Boards on trends – both within a particular industry as well as more general technological, demographic, geopolitical or macro-economic trends. Board attendance at industry conferences was also encouraged.
The panelists also valued desktop exercises in crisis management and cautioned against chasing the “current shiny new risk.” While anticipating potential substantive disruptive risks is an important oversight function, having the right people (including among Board members) and processes in place is also critical. Post-mortems and “lessons learned” Board discussions are also encouraged.
The panelists also encouraged directors to understand changing attitudes of the company’s customers and other constituents as those may be leading indicators of potential disruptive risks.
The program offered many practical take-aways for boards:
--If your company does not have an ERM process, it should initiate one as a starting point; once an ERM process is established, boards and management should look at the inter-relationships of risks and the “knock-on effects” that can impact the company long after the risk materializes
--Transparency of the CEO and the quality of executive sessions are key to understanding the risks that can arise from “culture and character”
--Scenario planning and desktop exercises can be very useful in identifying what will happen if . . . .. Root cause analysis to help avoid experiencing the occurrence of the same risk twice
--While addressing a risk that has materialized, it’s important to keep the fundamentals of the business in front of you
--Know your customer and how customer preferences may be changing
Andrea Bonime-Blanc is founder and CEO of GEC Risk Advisory, a strategic governance, risk, ethics and cyber advisor to executives and boards at companies, government agencies and NGOs. She is the Independent Ethics Advisor to the Financial Oversight and Management Board for Puerto Rico, a body created by the US Congress in 2016 to supervise the restructuring of their debt. Before founding GEC Risk, for two decades she was a senior executive (including general counsel, chief ethics, compliance, risk, audit, EHS and information security officer) at global companies including Bertelsmann, Verint & PSEG. She started her career as an international transactional lawyer at Cleary Gottlieb.
She serves as a start-up mentor at Plug & Play Tech Centre, is a frequent keynote speaker and author of many articles and numerous books including Gloom to Boom: How Leaders Transform Risk into Resilience and Value (Routledge 2019), Manual de Riesgo Reputacional (Biblioteca Corporate Excellence 2016), The Reputation Risk Handbook (Greenleaf 2014), and co-author of The Artificial Intelligence Imperative (Praeger 2018). She holds the Carnegie Mellon CERT Certificate in Cybersecurity Oversight, is an NACD Board Leadership Fellow and NACD Governance Faculty and has served on boards for over two decades including serving as Chair twice. She holds a joint JD in Law and PhD in Political Science from Columbia University, was born and raised in Germany and Spain and lives in New York City with her family.
Maureen Breakiron-Evans is a former Audit Partner and CFO who was responsible for driving the transformation of financial and technology operations, and the development of enterprise risk management programs for a variety of clients and Fortune 500 employers. She currently serves on the boards of Cognizant Technology Solutions, Ally Financial and Cubic Corporation. Maureen previously served on the boards of Heartland Payment Systems, FHLB-Pittsburgh, and ING Direct. After serving as an Audit Partner with Arthur Andersen, she held several senior executive positions in finance and technology at Transamerica Corporation, Visa, Cigna, and Towers Perrin, including Chief Financial Officer.
Matt has more than 30 years of experience in sales, marketing and management of global manufacturing businesses. Throughout his career, he successfully led multi-billion dollar manufacturing, infrastructure and business services companies with up to 34k employees.
Matt was recruited by Sterling Partners in January, 2017 to lead the transformation of Radial Inc. a $1.2B ecommerce services business. After an 8-week enterprise assessment, recommended and led the successful sale of Radial to Belgian Post. Prior to Radial, Matt served as CEO of Armstrong World industries, a $2.9B global building products company, retiring 3/16. Recruited by Armstrong’s board to improve P&L, drive leadership, operational and strategic improvements increasing ROIC & equity value 75%. Prior to AWI, he was Chairman & CEO of IKON Office Solutions, a $4.9B document management services company. Transformed company’s business model and nearly doubled shareholder value following a $1.6B merger with Ricoh Japan. Served in a transition role to lead the integration. Prior to IKON, spent 23 years at GE, last assignment s as President & CEO GE Lighting.
Matt is currently an operating partner with Advent International and with Periphas Capital; and the non-executive Chairman of Klockner Pentaplast Group. He is a member of the Board of Directors at WESCO International, Realogy Holdings, Foundation Building Materials, Inc. and Cenveo Corporation. He is a member of the National Board of Summer Search, and a member of the Advisory Boards of Drexel University’s LeBow College of Business and of the University of Idaho and Member of the Board of Trustees of ECS Philadelphia. He was formerly a member of the board of directors of MORSCO, Inc., Husky Injection Molding Systems Ltd., NCI Building Systems, Inc., Veritiv Corporation, Armstrong World Industries, Inc., IKON Office Solutions, Inc., Graphic Packaging Holding Company, Unisys Corporation, Con-way Inc. and Ricoh Americas Corporation.
Kelly J. Watson has more than 30 years of global auditing and advisory services experience progressing in various leadership roles at KPMG LLP. Ms. Watson is a global lead partner of KPMG and served a five-year term on the KPMG LLP Board of Directors from 2013 to 2018, acting as Lead Director from June 2017 to October 2018. She was National Service Group Leader of KPMG's U.S. and Americas Risk Consulting Practice from 2015 to 2019. Prior to this position, Ms. Watson spent six years as the Office Managing Partner of KPMG’s New Jersey Business Unit. Her international experience includes more than two years in the KPMG Czech Republic member firm’s Prague office. Ms. Watson served on the NACD’s Blue Ribbon Commission that produced the report in October 2018, captioned “Adaptive Governance: Board Oversight of Disruptive Risks.”Â