Many small medium enterprises appoint directors to their boards without sufficient research as to the real expertise that such a person can bring.
Often the board appointment is predicated upon what the director might be able to offer with regards business introductions and links to possible commercial markets. Whilst attractive in the short time, many organisations often end up with directors in a non-executive capacity acting as proxy commercial agents rather than an effective main board director.
This is not to say the above is not desirable, but maybe such an arrangement is not required at board level.
An area that is often overlooked by the SME owner manager is the ‘enterprise risk’ that their organisation faces. Most enterprises today have a variety of external and internal issues to consider. These may range from fluctuating pound to euro or further regulation. But the new director ought to be conversant or indeed add to the debate about the ‘enterprise risk’ – relevant to the organisation they are being appointed to.
Many smaller businesses may not have a formal enterprise risk process. However, they are likely to be conversant with many issues that they face. But sometimes regulatory or potential market issues that are on the horizon get overlooked.
Such corporate risks can have significant impacts upon an organisation if a structured planning and evaluation process is not deployed. Some activities with regards regulatory compliance can take months to prepare for.
So, it is sensible for owner managers to consider ‘enterprise risk’ as being a central platform of a good corporate governance agenda and to look for directors who can add not just useful introductions but can enhance the risk review debate.
Enterprise risk is part of the corporate governance narrative, which I will be writing on regularly.
Marcus Allen has twenty years’ experience as a management consultant. He has worked with over a hundred and fifty organisations on compliance / governance frameworks, covering both regulated and non-regulated arenas. Marcus holds a Master’s degree in Management Learning and Change from the University of Bristol and the highly respected Diploma in Governance Risk and Compliance from the ICA. He is a Fellow of the Chartered Management Institute and Fellow of the Institute of Consultants.