Boardrooms throughout the world have by and large become better at risk management as uncertain environments have constantly challenged original thinking. In some jurisdictions, corporate governance regimes have put pressure on executives by suggesting best practice and more open reporting, beginning with the risk appetite that the board is willing to undertake.

Risk and risk discussions have, over recent years, had more airtime at both board and board committee levels. Increasingly, audit committees are called audit and risk committees as that topic demands more attention and practising experts have been drawn in to populate such committees.

Looking at many risk registers over the years confirms the above. We have noted boards are getting better and more disciplined. New tools have been developed, example Value at Risk, heat maps, probability/impact matrices, stress testing, escalation procedures, etc. One can almost predict the headings when one goes through these documents as boards constantly fine-tune.

Two variables are sometimes missing though. The first is the monetising of risk: what would be the financial impact on profitability, cash flow, balance sheet (statement of financial position) and shareholder value of any of these events occurring?

The other sin of omission is what we refer to as strategic risk. This is often overlooked as the risk conversation concentrates on the usual legal, cyber, environmental, political type of risks (all very valid!)

Boards very rarely conduct a strategic health check when things are going well. Strategic reviews tend to be orchestrated and engage executives deeply only when performance begins to waiver or when a new CEO is appointed.

Here are a few thoughts for executives:

Indiana Jones

Is your business model still relevant? Far too often discussions on strategy assume that the current model is still appropriate and all conversations therefore take place within that assumption.

Those who choose to live by the sword get shot by those who don’t! Remember that famous scene from the first

Indiana Jones movie? The point here is that new competitors pay no respect to legacy and history. They just don’t care. Far too often the “stay as we are” option is the comfortable one until disrupted by new and different competitors. This choice of option must always be critiqued more fervently.

What is the craziest thing that our competitor(s) could do? We recommend you should consider that in your workshops. The findings may surprise you.

When platforms attack! To reinforce the point above, digital platforms are no longer content to be just that. They understand their capabilities and lever them accordingly. Credit card companies and retail banks have been under attack from the likes of Apple Pay, PayPal and so forth for some time now.

Nothing is for ever. Ask Nokia, Eastman Kodak and many others. Corporate longevity is no longer assured and recent studies point to the fact that businesses in most western economies are disappearing faster. No one has ‘a right’ to be in business. No business has a divine right to hold on to loyal customers. Customers have choice (and a lot of it) and loyalty is easily tested. Consumers have access to information like never before. Switching costs have come down or are inexistent. Furthermore, consumers now have voice. Word of mouse has replaced word of mouth. The court of public opinion carries considerably more weight than before.

“In our industry!” is a phrase you would probably want to avoid in strategic review sessions. Such an approach is too narrow and limits the scope of thought and conversation. New competitors often come from outside the industry. Sony must be livid at Apple “entering” the music industry.

Be wary of benchmarking. The ultimate benefit of benchmarking is perfect imitation. You and your competitors become the same, look the same and sound the same. This is one of the most difficult strategic positions in which to find yourself. Strategy should not be like following a fashion trend… Instead, be different, or better, or cheaper!

Cost-cutting is not a strategy! You are just fixing a problem. Strategy has to be generating more enduring advantages.

Marketing

The role of marketing has changed. Advertising has become surveillance and forecasting; influencing consumer behaviour has assumed considerably more importance. The boundaries between e-commerce and advertising have become blurred. Is your marketing function up to it? Who makes up that division? Experience is great as long as the future resembles the past. Do you have the right level of marketing experience? Remember: 20 years’ experience may well be one year’s experience repeated 20 times.

Be wary of management consultants and other strategic soothsayers. Advisers cannot do your strategy for you. They can assist in the process to ensure that the right debates take place, they will query, validate, act as agent provocateur if needed, but the end call rests with the board. Responsibility cannot be abdicated.

What about the process? How does strategy happen here? Who is involved? Is the process inclusive and democratic or is it the preserve of a few. Would the process stand up to scrutiny? When was it last reviewed. Are you happy about the quality of the information that the board receives?

Can you answer the following questions easily:

o We know how we compete.

o We know where we compete.

o (And by implication we know where we do not compete and how we do not compete)

o We fully understand our source of competitive advantage.

o We fully understand the link between our strategy and shareholder value creation.

o We always have a good Plan B. (Did David have one when facing Goliath?)

And above all, your strategy should be simple to articulate. Remember the movie Pretty Woman? The financier played by Richard Gere struggles to respond to the call girl played by Julia Roberts when she asks him, “What do you do?” He breaks into corporate finance mumbo jumbo that nobody understands. Much later in the movie, having thought it through, he revisits his answer with more clarity.

Jean Pousson is a faculty member of the Caribbean Corporate Governance Institute (CCGI), an independent, not- for-profit membership-based organisation. The CCGI is seeking to advance the principles of corporate governance across the Caribbean through three main arms: advocacy, professional development and membership. If you wish to step up, sign up online as a member and join us in one of the upcoming events. Contact CCGI’s CEO, Denise Deonarine, at ceo@caribbeangovernance.org.