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Deborah E. Wallace
Principal
Wallace Consulting
Board Advisory Services
Phone:
781.259.0550
Cell: 617.875.7069
Fax: 781.459.7999
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Strategy Development
The board’s involvement in strategy development is a controversial subject.
There are those who think the organization’s strategy is the sole
responsibility of the CEO, and that any involvement by the board borders on
micromanaging. There are others who believe that the board’s involvement in
strategy development is not only a core responsibility but also potentially
one of an organization’s greatest competitive advantages.
In order to make a case for either position, it is important to define the
ways in which boards participate. There are really two basic activities that
a board can contribute to: planning and thinking. Wallace Consulting and
Board Advisory Services believes that merely overseeing the strategic
planning process is a serious underutilization of a board’s collective and
individual experience and expertise.
There is no question that a well-executed process is critical to arriving at
a plan, and that it is the board’s responsibility to ensure that a sound
process is in place. But the greatest value that a board can add is in its
ability to provide senior management with strategic thinking.
For example:
 suggesting new concepts
to guide the future direction of the company as opposed to new products or
operations
identifying systemic
rather than operational changes to ensure that changes take hold and sustain
suggesting new ways of
capitalizing on “old” ideas
daring to question what
is mediocre or out-of-date
In contributing this way, it would be difficult to characterize the board’s
involvement as micromanaging. Wallace Consulting and Board Advisory Services
works with boards to ensure proper execution of its fiduciary role in
developing a strategy but also to ensure that their experience and expertise
does not go untapped.
Beyond Strategic Planning—Enterprise Risk Management
Wallace Consulting and Board Advisory Services believes that unless the
matter of risk is addressed as fundamental part of a strategy, it is a
strategy built on a house of cards. The best strategies anticipate
roadblocks. They assume there will be disruptive events, both internal and
external. They hypothesize about worst-case scenarios and assume the need
for mid-course corrections.
Planning for these possibilities in the broadest context of an
organization’s strategy has become business practice. Enterprise Risk
Management (ERM) is the term for the process for identifying, assessing and
mitigating potentially damaging events at the organizational level. It is
enterprise-wide because it takes into account business, financial and
operational risk throughout the organization -- throughout all business
units and departments. The rationale for such an expansive approach is that
a company is much more likely to design an effective strategy by creating a
single, integrated view of all risks, rather than addressing them
independently in isolation.
The basic ERM process is straightforward and is made up of three phases:
Risk Identification -
This is essentially brainstorming worst-case scenarios. By having each part
of the organization identify the top 3 or 4 risks associated with its
function or service the chance that serious risk factors will be overlooked
is significantly reduced.
Risk Assessment -
Once the risks are identified, they are categorized along two
dimensions: probability and impact. Drawing a simple chart using low, medium
and high to estimate both the probability of the risk occurring and the
severity of its impact readily highlights the organization’s highest risk
areas.
Risk Mitigation -
Identification, assessment and prioritization provide a blueprint for
action. Plans for mitigating the most probable events that have the greatest
impact on strategy and over which the organization can have control can then
be developed.
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