The average life expectancy of companies, according to a study by Credit Suisse, has fallen in recent decades to around 20 years and is predicted to be only 12 years in 2030 – down from 60 years back in 1950.
There is no indication that the world will become less turbulent in the coming decades, as technological development is expected to increase in its speed and scope. So it is more important than ever that companies gain the ability to survive and maintain corporate vitality in a world that constantly requires adaptation. The “Corporate RESILIENCE Recommendations” seek to explore how Boards can contribute to that crucial task.
The “Corporate RESILIENCE Recommendations” should therefore be considered as a supplement to “Recommendations for good corporate governance” which nations around the world have issued in response to financial incidents over the years.
Good “Governance” can never be trivialized. It is a critical condition to any enterprise. And thanks to the “Recommendations for good corporate governance”, most companies have become good at “Governance”. However, a number of studies and the business literature suggest that value-creating Boards concern themselves with much more than “Governance”.
It would be fair to say, that there is nothing new in the 20 supplementary recommendations, and most companies are already working on “Core”, “People”, “Strategy” and “Execution”. But institutionalizing that work increases the likelihood that it will become part of the company’s DNA/Culture.
Some might ask why “Sustainability” is not a category in itself. The reason is that “Sustainability” (“People / Profit / Planet”, triple bottom lines, etc.) and the UN’s 17 Sustainable Development Goals are the starting point for the work of achieving resilience. Only by actively incorporating “Sustainability” into everyday life does the company get its “license to operate”.
The most important aspect is neither the disciplines themselves nor the tool used to work with them. What matters is that discussions around these topics find their way into the Board’s Annual Wheel, so that concrete actions are crystallized, and companies as a result continuously improve and develop.
We hope the “Corporate RESILIENCE Recommendations” can contribute to this.
Copenhagen, January 2021
Netværk for RESILIENT Selskabsledelse
The foundation of most companies is a central idea, the “core”, that defines the company and its interaction with its customers, employees, and other partners. It is around this “Core” that the strategy is formulated, and action plans are drawn up. Companies who lost track often did so because they ended up forgetting to focus on that central idea.
The “core” is defined by a number of components that must be coherent. This also makes it a lot easier for companies to ensure a coordinated and sustainable development as it grows and enters new markets.
The recommendations below help Boards ensure clarity around the company’s central idea.
Even asset-heavy companies have, over the years, had to recognize that the most critical asset is their people. In a digital world, that truth is only becoming more and more important to recognize.
The “tangible” assets are included in the annual report and are carefully evaluated by the Auditors, Boards, and Executives. But only the fewest companies approach the “human” assets with the same thoroughness. The key is to be aware of the connection between systems, assets, and people – and the influence they have on each other.
The recommendations below help Boards ensure that companies are prepared to support their strategies with the necessary human resources.
Strategy is essentially about making choices in order to create the focus that will ensure sustainable, profitable growth.
That work requires a deep understanding of the company, its markets, value chains, and customers, as well as the surrounding realities and competitors. It is a task that does not leave much margin for error, which makes it imperative to carefully structure the work and ensure that the strategy is made measurable so its progress can be closely monitored and the strategic choices (re-)assessed on a regular basis.
The recommendations below help Boards ensure that the company has a well-founded strategy that can be communicated and monitored.
To avoid the risk of strategy documents merely ending up in cupboards and drawers without having achieved much else, it is crucial that the strategy is firmly anchored in the individual Business Units and Departments and thereby supports the company’s strategic development.
To create the right framework for this work, it is crucial that there is a common understanding between the Board and Executives of what their respective roles are and where the focus is expected to be.
The recommendations below help Boards ensure that the company mobilizes sufficient and focused execution power.
The work with the “Corporate RESILIENCE Recommendations” has led to many good discussions about which disciplines and questions should be included in the Board’s Annual Wheel. But during the discussions, it has also been suggested time and time again that for Boards to add value, they need not only to ask the most important questions, they also need to ensure that the dynamics in the board room allow for constructive discussions.
When that happens, Boards, in close collaboration with the company’s Executives, have the opportunity to be a catalyst and create the space and focus on the value-adding conversations and questions.
You can read the original “Anbefalinger for RESILIENT Selskabsledelse” and find out more about the “Netværk for Resilient Selskabsledelse” on www.resilientselskabsledelse.com. If you would like to have copy at hand, you can download the “Corporate RESILIENCE Recommendations” as a PDF.
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