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The primary role of the board

The board is the second-highest decision-making body in an organization structure, after the shareholders or owners. The owner (the citizens in case of a government-owned entity) or shareholders (for public listed companies) or the founder of the business in case of a family business, handpick people with exceptional skills and leadership and appoint them on the board of directors to govern the organization on their behalf.

For emphasis, the board’s primary responsibilities are:

1. Oversight – to ensure the entity is a going concern –business sustainability, strategy, and competitiveness. Sound financials (good cash flows, year on year growing profit margins, reducing business costs, reducing debt and low reliance on few customers) and business model provide assurance of the entities’ going concern.

The board provides oversight by appointing a competent chief executive or managing director, setting for him performance targets and conducting timely on-going monitoring and performance evaluation. It is for this reason that the board must approve the organization’s strategy and budget.

2. Risk management – it is the responsibility of the board to ensure that there are no surprises to the business. This role covers the governance function which includes compliance and implementation of systems, processes, policies, procedures, and controls over critical functions to ensure the protection of assets from misuse or loss both accidental and intentional.

To achieve this role, the board must approve a risk management strategy with a clearly articulated Board’s Risk Appetite (request a sample via email) overall major processes and functions like information systems, human resources, finance, and operations.

Copyright Mustapha B Mugisa, 2019. All rights reserved.

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