Drop-In Directors

Being a Director is like buying a house—and not being allowed to go inside to look around. Would you buy a house if the only way you could see what was inside was to look through the windows? That’s, in a sense, what every Director is required to do.

Directors aren’t around day-to-day, unlike the CEO and senior management. They can’t observe events as they unfold. Instead, they “drop in” to attend six to eight Board meetings a year that last from two to ten hours, and they review information prepared by the CEO.

How can Directors fulfill their responsibilities for monitoring and supervising the CEO? How can you be held accountable for the reputation and financial well-being of the enterprise you serve when you’re only an outsider looking in? What windows do you look through to gather and assess the information you need to “buy the right house”? That’s the challenge faced by all Directors, from non- profits to major corporations.

To bridge the time and knowledge gap, effective Boards rely on their capabilities as risk managers. They specify the information they want to see through ten risk windows that give the Board an almost compete view of the inside of the house. By examining the CEO’s management through each risk window, the Board can monitor and supervise the CEO, contribute to the CEO’s decisions, and fulfill its mandate of preserving the reputation and financial well-being of the enterprise.

Risk management is a key skill for Directors. Fortunately, it’s a skill at which you’re probably already proficient. You’ve been identifying and managing risk for most of your life. With experience you’ve learned to apply it to complex situations like buying a house, considering a promotion, or making an investment. You assess the risk, weigh your options, and consider the consequences. With each decision, you become more skilled and confident in your ability.

For more information on the risk windows and how to use them, visit our website at www.GovernanceTools.com.