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NACD Calls on Board Directors to Strengthen Oversight of Disruptive Risk

October 1, 2018

WASHINGTON, Oct. 01, 2018 (GLOBE NEWSWIRE) -- The National Association of Corporate Directors (NACD), the authority on boardroom practices representing more than 19,000 board members, today released The Report of the NACD Blue Ribbon Commission on Adaptive Governance: Board Oversight of Disruptive Risks, which focuses on helping boards of directors improve oversight of complex, fast-moving risks that pose a major threat to their organizations.

“Whether driven by unforeseen circumstances or problems hiding in plain sight, disruptive risks won’t wait for boards and management teams to catch up,” said Sue Cole, Commission cochair and director at Biscuitville, Diversified Trust, Martin Marietta Materials, and NACD. “Put simply, these forces have the ability to make or break an organization’s success.” The Blue Ribbon Commission defined “disruptive risks” as those risks that have a significant, severe, and often sudden effect on a company’s revenue, profitability, competitive position, and/or reputation.

In an NACD poll of public- and private-company directors in March of this year, more than 6 in 10 respondents said they view disruptive risks as “much more important” to the business environment today versus five years ago. Yet nearly half of directors said their board’s tendency to focus on oversight of known risks presents a significant obstacle to the board’s ability to understand and oversee disruptive, atypical risks, and less than 20 percent said they were extremely or very confident in management’s ability to address these types of risks.

“This research underscores the imperative for boards to focus on the risks we don’t see coming,” said Kelvin Westbrook, Commission cochair and director at Archer Daniels Midland Co., Camden Property Trust, Mosaic, and T-Mobile. “NACD’s effort will prepare boards to help management see around corners in a world where disruption is continuous.”

The report of the 2018 NACD Blue Ribbon Commission initiative—led by a group of more than 25 experienced directors and leading governance professionals—contains guidance and recommendations such as these to help boards strengthen their oversight of disruptive risks:

-- Improve the visibility of disruptive risks in the boardroom, including enhancing the content and format of reports from management and information from outside sources. -- Stay informed about company and industry developments between board meetings. -- Conduct deep dives, with management, on disruptive risks and their implications for the organization’s strategy.

“Board members can be a company’s greatest asset by embracing an adaptive approach to governance that helps anticipate unknown risks,” said NACD CEO Peter Gleason. “The goal of the Blue Ribbon Commission this year is to give boards a leg up on navigating a volatile business environment by providing them with practical guidance and tools.”

In addition to specific recommendations and action steps boards can take to improve their oversight of disruptive risks, the NACD Commission developed a toolkit that directors can use to benchmark their current practices and implement improvements, including the following:

-- Discussion guides to inform board-management meetings related to identifying and prioritizing disruptive risks -- Templates for incorporating disruptive-risk oversight criteria into board evaluations and guiding questions for assessing management’s risk-management activities -- Examples of scenario-planning exercises and board-level reporting related to disruptive risks

Gleason added, “NACD views the release of the Commission’s report as part of our ongoing conversation with the director community on how boards can elevate their governance practices to help their organizations stay ahead of disruptive risks.” Future NACD activities around disruptive risk will include local and regional conversations with directors at NACD chapter events and educational programs, as well as thought leadership including blog posts, webinars, and coverage in NACD Directorship magazine.

The Report of the NACD Blue Ribbon Commission on Adaptive Governance: Board Oversight of Disruptive Risks and comprehensive toolkit (available exclusively to NACD members) can be accessed here.

The report’s Commissioners comprise distinguished board directors, executives, and governance experts. In aggregate, they serve on the boards of 35 publicly traded, 32 privately held companies, and 19 nonprofit-organization boards. The Commission includes 12 current and former CEOs.

The 2018 NACD Blue Ribbon Commissioners(with Primary Affiliations and Board Seats)Co-Chairs:

-- Sue Cole,* SAGE Leadership & Strategy, Biscuitville Inc., Diversified Trust, Martin Marietta Materials -- Kelvin Westbrook, The Archer Daniels Midland Co., Camden Property Trust, Mosaic Co., T-Mobile

Commissioners:

-- Maureen Breakiron-Evans, Cognizant Technology Solutions, Ally Financial, Cubic Corp. -- Ian Bremmer, Eurasia Group -- Stephen Brown, KPMG Board Leadership Center -- Irene Chang Britt, Brighthouse Financial Inc., Dunkin Brands Group Inc., Tailored Brands Inc., Baybridge Senior Housing Inc. -- Nora Denzel, Advanced Micro Devices, Ericsson, Talend -- Nick Donofrio,* Aptiv PLC, HYPR Corp., the New York Genome Institute, the MITRE Corp., Ravenpod Inc., Quantexa Ltd., Sproxil Inc., Syracuse University -- John Drzik, Marsh Global Risk and Digital, Marsh & McLennan Companies -- Bill Easter III, Concho Resources Inc., Delta Airlines Inc., Grupo Aeroméxico SAB de CV -- David Flaschen, Informa PLC, Paychex Inc. -- Peter Gleason,* NACD, Nura Health Inc. -- Holly Gregory, Global Corporate Governance & Executive Compensation Practice, Sidley Austin LLP -- Lee Hanson, Heidrick & Struggles -- Karen Horn,* Simon Property Group, National Bureau of Economic Research, US-Russia Foundation for Economic Development and the Rule of Law -- Dennis Kass, The Wendy’s Co., Lockheed Martin Investment Management Co. (Advisory Board) -- Jannice Koors, Pearl Meyer -- James Lam, James Lam & Associates, E*TRADE Financial, RiskLens Inc. -- Sara Mathew, Campbell Soup Co, Fannie Mae, Shire PLC, State Street Corp. -- Mary Pat McCarthy, Andeavor, Palo Alto Networks Inc. -- Blythe McGarvie, Apple Hospitality REIT Inc., LKQ Corp., Sonoco, Wawa Inc., Lyric Opera of Chicago -- Ray Rothrock, RedSeal Inc., Check Point Software Technologies Ltd., Roku Inc., UTIMCO -- Suzanne Spaulding, George Washington University’s Center for Cyber and Homeland Security, King & Union, The Belfer Center’s Defending Digital Democracy Initiative (Harvard University), Center for Strategic and International Studies -- Jerre Stead, DTN, Banner Alzheimer’s Institute, Garrett-Evangelical Theological Seminary, American Writers Museum, Guideposts -- Shelley Stewart, E. I. du Pont de Nemours and Co., Drexel University Center for Corporate Governance, Howard University -- Kelly Watson, KPMG -- Dennis Whalen, KPMG Board Leadership Center -- Jim Wiener, Bank of New York Mellon Corp. -- Robyn Bew (ex officio), NACD

*NACD Board memberThe Primary Affiliations and Board Seats of commissioners in this list are selective and do not include all directorships. Commissioners participate as a service to the governance community and not as representatives of any organization.

About NACDThe National Association of Corporate Directors (NACD) empowers more than 19,000 directors to lead with confidence in the boardroom. As the recognized authority on leading boardroom practices, NACD helps boards strengthen investor trust and public confidence by ensuring that today’s directors are well prepared for tomorrow’s challenges. World-class boards join NACD to elevate performance, gain foresight, and instill confidence. Fostering collaboration among directors, investors, and corporate governance stakeholders, NACD has been setting the standard for responsible board leadership for 40 years. To learn more about NACD, visit www.NACDonline.org.

Contact: Susan Oliver susanboliver@gmail.com 703-216-4078

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