• Financial & Legal Compliance
• Managing Shareholders
• Hiring the CEO
• Approving company Strategy and managing company risk
There is a lot of focus on the early ones on this list, and indeed that is the impression most have of a board – a bunch of stodgy old people who say no to everything and keep everyone out of jail. A truly effective board does that and has a healthy and progressive approach to strategy and risk. And that’s where we want to be as well when we transition from founder to owner.
There are any number of tools out there to help guide you on strategy, but ultimately you will come up with a list of strategic initiatives that the business will look to undertake to fulfil the mission set by the owners as part of the “Principles” stage.
• Culture – aligned to the fabric of the business, who it is, and how it needs to behave
• Resilience – aligned to protecting the business stability, its current operations, and keeping the business active
• Growth – aligned to taking the business to the next level and fulfilling the mission. This is the next level activities
The amount of focus on each of these areas will depend on the available resources and capacity that the business has available to it. Like everything in business, these are a tradeoff.
And in terms of trade off there is another key responsibility as a business owner and board member that you need to consider. Risk. Business Owners and Board are responsible for managing risk. But to manage risk you first need to consider “how much risk will I accept”.
So, the next key step is to set your “risk appetite”. This is a statement that you can build that considers the different areas of your business and how much risk you will accept in that area. Set a “tolerance” in that area on a scale you choose; 1-10 perhaps or 1-25. Now go through all the strategic initiatives and look at the associated risks. Rate each of those risks based on the scale you picked before for the different risk areas. Do those risks fall under or over your thresholds? If they are over then you need to put work, now, into the risk mitigation plans required to reduce the risk within your selected risk thresholds.
Whoa! This is starting to look like a process that you could hand off to other people, review the outcomes, review the approaches, and sign off on, without being directly involved. I think we are getting somewhere.
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