Business

How to Manage a Board of Directors in Times of Crisis

Board of Directors

Board of Directors is a complicated task, largely due to the high complexity involved in their proper management, as well as the rapid evolution of the markets, which constantly affects companies and, consequently, the boards.

However, when we refer to the management of a Council in times of disruption, the difficulty is even greater, being necessary to apply a series of measures with which to achieve maximum efficiency.

We point out that the proper functioning of the Board is not an easy task, which is why the total involvement of all the workers and organs of the company is necessary, especially those with the greatest influence, which represents an additional challenge to be faced by the employees.

The importance of adapting

As we have pointed out, much of the blame is related to the constant economic, political and social evolution of the markets, which clearly makes suitable business management difficult. Being able to adapt to these changes quickly is essential, so counselors should not be neglected in this regard.

Operational risk

Operational risk is possibly the most complicated and important of all, so it is necessary to pay attention to it for the correct management of the boards. To do this, it is necessary to invest in good governance capable of managing risk.

Provide independence to the directors

The independence of the directors is a key aspect for any company, however, on many occasions it is not possible to achieve this freedom from the Board, among other issues, due to the proximity or relationship of the directors with the management.

This relationship generates in many companies “subordination” of the board, this being a situation that must be reversed as quickly as possible. For this, the first step to be established is the creation of an Appointments Committee, in the event that this does not exist in the company, with the election of the members of the Board remaining among the tasks of this committee. Thus, the independence of the directors is guaranteed, which is key to a successful business development.

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Establish the role of audit committees

Fourth, we highlight the role of the audit committees, which goes beyond what their name indicates, since they also play a fundamental role in terms of risk management. As a result of the latest economic crises, together with the increase in cyber attacks on large companies, this role of the audit has acquired greater relevance.

Board composition

The composition of a Board should not be established lightly, as it can generate a disruptive situation when the number and profile of directors is far from adequate. Therefore, we must pay special attention to these two aspects:

Regarding the number of directors who are working best in companies, this is equivalent to 10 or 15 people, based on the needs of each company. Regarding the profile of these, the hiring of very different profiles should be sought, thus guaranteeing that the body encompasses several criteria.

Those disruptive Councils that do not comply with a composition similar to this, must work to achieve it.

Functioning of the Council

A disruptive Council must begin by laying the foundations with which to ensure that this operation is adequate. For this, there are different actions that have to be carried out. The first one consists of clearly defining the mission and dimension of the Council, in such a way that the different tasks are carried out according to these two previously defined aspects.

Additionally, it is essential to achieve the full involvement of the company by the directors.

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