What is the role of the board?
A popular saying goes “a fish starts rotting from the head.”
Why? That is not what is popular. According to Biology, a living thing starts to rot from the point where bacteria enter it. For fish, it is the gut. So fish starts rotting from the gut not the head.
It is a well-known fact that when an organization or state fails, it is the leadership and not the lower cadres that are the root cause of the failure. And that is how the saying came about: the “fish starts rotting from the top.”
For a business, the top most decision making level of an organization is the Board. You need a quality Board of Directors to provide good governance – oversight (Risk management and compliance) and going concern (strategy and execution). When an organization fails to succeed it is the Boards of Directors to blame.
The primary roles of the Board are two fold;
i. Risk management which entails systems, processes, procedures and compliance –(the applicable laws and regulations are adhered to).
ii. Going concern – strategy and execution
Having a strategy is one thing. A good strategic plan must be organic. It should be a living document to ensure it is used by the stakeholders by aligning team focus and priorities on a daily basis
To achieve the board’s role of oversight, the Board makes use of a tool called – risk appetite which clearly specifies the do’s and don’ts of the business. The risk appetite defines the limits within which the CEO must conduct the business. The risk appetite is contained in the organization’s risk management frame work.
An effective Board ensures an approved risk appetite is in place within the institution’s risk management framework. As new board member, have you reviewed the Risk Appetite? Is it clear to the CEO and other Board members?
To achieve the Board’s role of strategy and execution, the Board must set a score card against which to monitor strategy. The score card specifies targets against which the Executive Director or CEO’s performance is evaluated.