Annual surveys conducted by PwC in Russia and around the world have confirmed that boards need experts who have particular skill sets, knowledge and experience in order to address challenges effectively.
For the last three years, survey respondents have highlighted the same list of skills: Russian companies need board members who have financial and risk management expertise as well as sector experience. In the 2017 survey, the list grew to include experience in a multinational company.
One of the most important issues for boards these days is planning for the succession of senior managers. A smooth succession can be critical for a company’s long-term success.
Executive compensation has long been of concern to investors and boards. Many investors believe that executive compensation should be tied to both individual performance and business results.
In today’s rapidly changing economic environment, it is becoming ever more difficult for investors, boards and management to strike the right balance between meeting their short- and long-term goals. On the one hand, senior executives must think strategically, given their commitment to increase shareholder value over the long term. On the other hand, they need to address everyday business challenges and respond quickly to changes in an ever-shifting economic landscape. Contributing to and overseeing the execution of company strategy are core responsibilities of the board of directors. Compared to just a few years ago, boards are now using longer time horizons to oversee strategy execution. In keeping with this long-term approach, boards must constantly evaluate emerging economic, geopolitical, environmental and technological megatrends.
Risk management involves identifying, assessing, and prioritising risks and applying resources to minimise, control, and mitigate the impact of unfortunate events on a business. It is the job of a board to make sure that their management teams have adequate risk management policies and procedures in place. A major part of any risk oversight plan is determining the company’s risk appetite, i.e. the amount of risk an organisation is willing to accept in pursuit of its strategic objectives. When done right, this is a robust process that can help management and the board understand their risk exposure and take appropriate strategic decisions.
Companies now see IT strategy and risk management as inextricably linked to corporate strategy. In turn, the level of board engagement in this area is increasing. Overseeing the implementation of a company’s IT initiatives, particularly in the area of information security, can be a challenging task for board members.
Building good relationships and fostering constructive dialogue with shareholders, investors and other stakeholders should be high on the agenda of any board.
The board is the key element of the corporate governance system and the management body that takes decisions on a company’s most critical operating issues. The success of a business directly depends on how well the board performs its duties. For this reason, shareholders and other key stakeholders closely monitor the board’s performance.
The Russian Corporate Governance Code recommends conducting regular, comprehensive assessments of the performance of the board and its committees, as well as of specific directors, including an annual self-assessment and a triennial, independent assessment done by an outside organisation. The annual self-assessment of the board’s strengths and weaknesses can be a powerful tool for improving performance.
Sustainable development strategies not only help to enhance your corporate reputation and reduce risks, but they can also add value to your business over the long term. Regular reporting on environmental, social and corporate governance initiatives has become an essential part of being a socially responsible company. As organisations update their sustainability strategies, boards are being increasingly proactive and engaging with stakeholders to prepare for the future.
Partner, Corporate Governance, PwC Russia
Tel: +7 (495) 967 6403
Director, Corporate Governance and Sustainability, PwC Russia
Tel: +7 (495) 967 6441