Emerging trends in risk and governance: perspectives from the boardroom
Looking beyond the immediate impact of COVID-19 to the emerging risk and governance trends, Emperor’s most recent panel discussion in the ‘Keeping communications out of lockdown’ series offered insight into boardroom perspectives and the topics dominating discussion.
The volume of regulatory change and reform in governance and reporting over the past few years has been significant. The surge in non-financial reporting requirements and new UK Corporate Governance and Stewardship Codes have placed greater emphasis on corporate sustainability and directors' duties. Companies are under a huge amount of pressure to demonstrate what they’re doing around climate change, diversity and social impact in particular.
And COVID-19 has accelerated a number of these recent developments, such as the increasing focus on purpose and culture, and the importance of stakeholder engagement. We’re also seeing more traction and interest in TCFD and climate reporting. Some of the key themes from our discussion centred on building trust, transparency, the long-term outlook and engagement, with each of our panel experts sharing their top three takeaways and pointers on the risk and governance outlook.
Mark O’Sullivan, Director of Corporate Reporting at PwC
1. Climate change is a major issue. Companies need to be on top of this - it’s not going away.
2. Report an effective strategically-focused story. Break down the barriers in the annual reporting process to cut the clutter. Think about how best to utilise the space you have. Draw closer alignment between the strategic report and other documents to avoid repetition and inconsistency.
3. Be more forward-looking. The annual report has stubbornly remained a retrospective document. However, your audience wants to know what you’re doing to ensure the long-term sustainability of your business model coming out of the crisis. Take the short-term lessons from the pandemic in relation to growing concern and apply them to a more forward-looking perspective.
Alison Baker, Non-Executive Director at Kaz Minerals, Helios Towers, Endeavour Mining and Rockhopper Exploration
1. Articulate a sustainable business strategy rather than a sustainability strategy. This is important for companies in the long term.
2. Don’t underestimate the importance of intangible value within your organisation. Your reputation and social licence are built off public interest, purpose and the value you bring to wider stakeholder groups.
3. Ground in reality. Ensure your words and actions are aligned. What are boards and executives doing to walk the talk in the long term?
Craig Murray, Head of Risk at Centamin
1. Have a proper discussion about risk. Think about things moving into the future. The concept of new and emerging risk is not about filling space under principal risk disclosures. It’s about providing proper insight into the things that are driving your organisation.
2. Take the lessons learned. COVID-19 is no longer a risk, it’s a scenario. Take the positive learnings from this; greater engagement with stakeholders and government and so on, and properly tell that story.
3. Take a more forward-looking approach. To Mark’s earlier point, the value of reporting is not in backward looking statements, but the future focus. Look ahead and think about things differently.
Chris Stamp, Director at Ceradas
1. Talk about the board’s journey. Boilerplate governance disclosures no longer hit the mark. Use specific examples of board engagement and decision-making during covid to illustrate how the board works.
2. Emphasise how purpose and values work. COVID-19 has shone a light on business behaviour. Companies who have been fair in relation to furlough and executive pay are being recognised.
3. Don’t let the coronavirus define your year. This has been a unique year in many ways, with plenty of important developments other than the impact of coronavirus, particularly with the Black Lives Matter movement, Brexit and within cyber and technology. Don’t let the pandemic dominate the narrative.
It is crucial these issues make it onto the board agenda. External stakeholder pressure will not abate, and as companies look to build themselves back for a post-pandemic world, transparent engagement and proactive action will be the keys to success.
If you would like to discuss any of these topics in more detail, please get in touch at [email protected]