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Pay particular attention to potential the company’s crisis planning aligns with its risk
risks posed by tone at the top, culture, profile, how frequently the plan is refreshed,
and incentives. While a robust risk and the extent to which management—and the
management process is essential to board—conduct mock crisis exercises. Do we
prevent and mitigate risk events, it is not enough. have communications protocols in place to keep
As we have seen in recent years, many of the crises the board apprised of events and the company’s
that have posed the most damage to companies— response?
financial, reputation, and legal—have been caused
by a breakdown in the organization’s tone at the
top, culture, and incentives. As a result, boards Reassess the company’s
need to pay particular attention to these capital shareholder engagement program.
“R” risks, which may pose the greatest risk of all Shareholder engagement is rapidely
to the company. In today’s business environment, becoming a top priority for companies
it is more important than ever that the board be as institutional investors increasingly hold boards
acutely sensitive to the tone from (and example set accountable for company performance and demand
by) leadership and to reinforce the culture of the greater transparency, including direct engagement
organization, i.e., what the company does, how it with independent directors. Institutional investors
does it, and the culture of compliance, including a expect to engage with portfolio companies—
commitment to management of the company’s especially when investors have governance
key risks. concerns or where engagement is needed to make
a more fully informed voting decision. In some
cases, investors are calling for engagement with
Reassess the company’s crisis independent directors. As a result, boards should
prevention and readiness efforts. periodically obtain updates from management
Crisis prevention and readiness have about its engagement practices:
taken on increased importance and Do we know and engage with our largest
urgency for boards and management teams, as the shareholders and understand their priorities? Do we
list of crises that companies have found themselves have the right people on the engagement team?
facing in recent years looms large. Crisis prevention What is the board’s position on meeting with
goes hand-in-hand with good risk management— investors? Which of the independent directors
identifying and anticipating risks, and putting in should be involved? Strategy, executive
place a system of controls to prevent such risk compensation, management performance,
events and mitigate their impact should they occur. environmental and sustainability initiatives, and
We are clearly seeing an increased focus by boards board composition and performance are likely on
on key operational risks across the extended global investors’ radar.
organization—e.g., supply chain and outsourcing
risks, information technology and data security
risks, etc. Do we understand the company’s Refine and widen boardroom
critical operational risks? What has changed in discussions about cyber risk and
the operating environment? Has the company security. Despite the intensifying
experienced any control failures? Is management focus on cyber security, the cyber-
sensitive to early warning signs regarding safety, risk landscape remains fluid and opaque, even as
product quality, and compliance? Of course, even expectations rise for more engaged oversight. As
the best-prepared companies will experience a the cyber landscape evolves, board oversight—and
crisis; but companies that respond quickly and the nature of the conversation—must continue to
effectively—including robust communications— evolve. Discussions are shifting from prevention
tend to weather crises better. Assess how well to an emphasis on detection and containment,
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