Operationalising Corporate Governance: Walking the Talk Vs Talking the Talk!

Interesting article here on Corporate Purpose: ESG, CSR, PRI and Sustainable Long-Term Investment (https://corpgov.law.harvard.edu/2018/05/04/corporate-purpose-esg-csr-pri-and-sustainable-long-term-investment/)

It makes reference to … The Dutch Corporate Governance Cod (December 8, 2016) which expresses purpose as the duty of the management board … When developing the strategy, attention should, in any event, be paid to the following:

1. the strategy’s implementation and feasibility;
2. the business model applied by the company and the market in which the company and its affiliated enterprise operate;
3. opportunities and risks for the company;
4. the company’s operational and financial goals and their impact on its future position in relevant markets
5. the interests of the stakeholders; and
6. any other aspects relevant to the company and its affiliated enterprise, such as the environment, social and employee-related matters, the chain within which the enterprise operates, respect for human rights, and fighting corruption and bribery.

Separately, the proposed revision to the UK’s Corporate Governance Code (www.frc.org.uk) poses questions for the board (page 3) as follows:

1. Have we clearly set the company’s purpose, strategy and values, identified the significant risks and provided enough direction for management?
2. How do we obtain assurance that management is identifying and addressing future challenges and opportunities, for example as a result of technological change or changing stakeholder expectations?
3. How do we ensure that the board makes well-informed and high-quality decisions based on a clear line of sight into the business?
4. Have we considered its implementation, feasibility and impact on stakeholders as well as its impact on financial performance?
5. What percentage of board time is spent on financial and behavioural performance management and is the balance right?
6. How do we make sure the voice of the workforce, customers and wider stakeholders is heard at board-level and what impact has this had on our decisions?
7. How do we obtain assurance that the culture we are leading is open, accountable and aligned to purpose, strategy and values?

‘’Walking the Talk’’ means that you can evidence requirements and answers to questions in real time using traditional methods applied to new technologies’’

The days of Excel, Word, PowerPoint and standalone Governance Risk and Compliance applications are over.

The commercialization of affordable Machine Learning technologies means that you can now run queries across strategic data sets derived from ‘human sensors’ (i.e. your front line decision-makers) in real-time.

This means that instead of using scarce resources to gather data, generate information, establish facts and painstakingly agree on findings, that this can now be automated.

This is what they call Expertise Augmentation and Automation and it results in the delivery of automated:

1. Insights … into what’s really going on across you operational and front-line decision-making populations,
2. Foresight … into what your own decision-makers see coming around the corner,
3. Board Oversight … in the form of ‘evidence’:

• That you are doing what you say you are doing,
• Underpinning the answers posed by the FRC above.

Use cases today include:

1. STRATEGY: The non-financial operational activities today … which will underpin strategic/financial performance tomorrow,

2. EXECUTION: The validity of principal business assumptions … from the board room to front-line decision-makers,

3. CAPITAL ALLOCATION: Proof that people have thought things through … as they draw down scarce capital,

4. DISRUPTION: Competitor strengths and weaknesses/emergence of business model disruptors … before it’s too late,

5. CULTURE: ‘How we do things around here’ (i.e. Culture) … as distinct from ‘how we hope/pretend we do things as defined in our corporate values statements’,

6. ESG/CSR: Conduct of third party suppliers … whose behaviours affect our reputation

7. CRISIS MANAGEMENT: Bouncing back (resilience) and forward (organizational agility) … when abnormal and adverse events occur across modern-day complex organizations.

The list is endless …

What do you think?

Peadar

Peadar Duffy is Founder Director of SOLUXR www.soluxr.com (An Irish and Latin blended name meaning to Illuminate) which provides expertise augmentation and automation solutions for burning strategic issues facing complex networked/distributed organizations.

*This article was first published on May 7, 2018