10 Points to Help Boards Manage Recession Risk

By
Peter Galuszka

http://blogs.bnet.com/ceo/?p=1717

January 27th, 2009 @ 11:28 pm

 Tough, recessionary times mean that management needs to reassess how its board and C-Suite manage risk. Changes need to be considered that involve both structure and philosophy.

Consulting firm Weil, Gotshal & Manges has put together a 10-point report on
how to approach risk issues in the current environment. The report was
prepared by Ira M. Milstein, Holly J. Gregory and Rebecca C. Grapsas.

Here are the 10 points:

1. Apply judgment in tailoring governance structures and processes to the current needs of the company. 


2. Take a fresh look at board composition and director competency.


3. Consider implementing some form of independent board leadership.








4. Ensure that risk oversight is on the board’s agenda, as a matter of substance and process.








5. Understand the impact of risk on strategic aspects of operations.


6. The compensation committee will need to work to identify
   the risks and implement compensation structures designed to reward
   long-term performance and incorporate enhanced claw-back features.


7. Reemphasize (and review) disclosure controls and procedures
   to ensure timely and accurate disclosures, as well as effective
   internal controls, compliance and ethics systems generally.


8. Times of crisis and stock market freefall increase pressure on management to meet performance targets.


9. Exercise caution in adjusting previous equity compensation
   grants (for example, repricings or exchanges or in otherwise adjusting
   compensation with respect to missed performance goals.


10. Ensure the vitality of the tone at the top and its
    alignment with risk profile, strategic direction, compensation
    incentives and financial reporting and controls.