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Recognize that connecting and
calibrating strategy and risk is more
important—and more challenging—
than ever. What a difference a few months
can make. The UK’s Brexit vote and a Trump win in
the U.S., which caught most observers—and many
corporate strategies—flat-footed, will have major
implications for global markets, and the geopolitical
landscape at large. That so few had predicted these
sea changes despite exhaustive analysis in the run-
up to both events is a stark reminder to businesses
of how marketplace signals can be fundamentally
missed (be it status quo thinking, bias toward
the familiar, or comfortable complacency) and
the playing field fundamentally altered overnight.
The geopolitical landscape will become clearer,
but expect the competitive landscape to remain
dynamic and cloudy, leaving little lead time.
Technology advances and relentless innovation,
business model disruption, the emergence of
Millennials and other demographic shifts, evolving
customer demands and employee expectations,
and more will put a premium on corporate agility
and the ability to pivot as conditions change.
Think about constant transformation, talent risk
management and the opportunities afforded by
“new” technology. Does management have an
effective process to monitor changes in the external
environment and test the continuing validity of
strategic and risk assumptions? Does this process
provide early warning that adjustments may be
necessary? Does the board have the right people
and perspectives to make the necessary linkages
between external forces and the company’s
strategy and risk profile? Make strategy an ongoing
discussion (versus an annual “decision”) that
incorporates smart risk taking and robust scenario
planning with plenty of what-ifs on the table. In
short, “strategy and risk” should be hardwired
together and built into every boardroom discussion.
© 2017 KPMG Central Services, a Belgian Economic Interest Grouping (“ESV/GIE”) and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Belgium.
Develop and execute the strategy
based on total impact. As we
noted at the outset, the context for
corporate performance is changing
rapidly as political, social, and regulatory forces
reshape the competitive landscape. Consideration
of the corporation’s role in society is moving
from the periphery to the center of corporate
thinking as expectations of investors, customers,
employees, and other stakeholders challenge
companies to understand the total impact of
the company’s strategy and activities. Strategy
development and execution requires a holistic
approach, encompassing the full range of risks and
opportunities—financial, reputational, regulatory,
resource- and talent-related, and more—that impact
the company and its many stakeholders over the
long term.
Take a hard look at the board’s
composition: Is the talent in the
boardroom aligned with the
company’s strategy and future
needs? Given the demands of
today’s business and risk environment (and
increasing scrutiny by investors, regulators, and the
media), aligning boardroom talent with company
strategy—both for the short term and the long
term as the strategy evolves—should be a priority.
Not surprisingly, 43 percent of respondents in
our recent survey, Building a Great Board, cited
“resistance to change” and “status quo thinking”
as hampering their board-building efforts. Consider
key recommendations of the NACD Report on
Building the Strategic Asset Board and the WCD
Commission/KPMG report, Seeing Far and Seeing
Wide: Moving Toward a Visionary Board. As noted
in these reports, directors should focus squarely
on board composition/diversity and succession
planning, robust evaluations, tenure limits, director
recruitment and onboarding, board leadership,
stakeholder communications, and continuing
director education—all tailored to the company and
industry. In short, “periodic board refreshment”
should give way to robust, continual improvement
and active board succession planning.