The four main corporate board topics are all interrelated — strategy, risk, data and cybersecurity. The interconnectedness of risk factors is causing boards to take a more formalized approach to risk management. Today’s boards are challenged with exploring strategic alternatives and how their options relate to various degrees of risk.

To meet the challenge, boards are asking for more data on risk. According to a Deloitte survey of corporate secretaries, boards are taking an in-depth look at risk analytics at least annually, if not semi-annually or more often. Corporate boards will find it easier to align their strategies with risk with the help of a board management software system.

Best Practices for Risk Analytics Are Evolving

Improving risk analytics is a process that continues to evolve because of the impact of technology and the economy. In considering how to improve risk analytics, it’s important to look at who handles it; how the board allocates capital; and the impact of social media, big data and cybersecurity awareness.

Best practices for good governance aren’t clear on who is the best individual or group to take responsibility for risk analytics. As a result, corporations implement their own approaches to assigning responsibility for risk analysis. Some corporations assign responsibility to their audit committees. This makes sense because audit committees are often integrated with risk management practices.

Other corporations spread the responsibility for risk analytics across several committees. Many of them have cross-membership of their committees. In either case, the committees share their knowledge, research, expertise and board minutes with the rest of the board.

Still other boards make it a full board responsibility for having detailed conversations about the best ways to analyze risk and its impact on their strategic planning.

Breaking Down the Components to Improve Risk Analytics

Switching Up Capital Allocation Strategies

The Deloitte survey showed that boards are switching up their capital allocation strategies. Large-caps have long placed a heavy emphasis on dividends and capital expenditures. Mid- and small-cap companies focused more heavily on acquisitions and capital expenditures.

The risk climate of today is causing boards to consider changing their strategies for capital allocation. Corporations of all sizes are trending on almost evenly spreading across dividends, stock buybacks, acquisitions and capital expenditures.

Creating Social Media Policies

Globally, individuals and businesses are increasing their use of social media for personal and business reasons. Comments and memes that appear on social media platforms can create liability issues and damage a corporation’s reputation if they get misused. The most recent example of a senior executive who got caught up in a social media debacle pertains to Tesla CEO Elon Musk, who has been at the center of a series of controversies over comments he has tweeted.

The Deloitte survey tells us that about 84% of the companies they surveyed had a social media policy in place. Of those same companies, 31% of the secretaries indicated that their social media policies applied to board directors. About 78% of the companies aimed their social media policies at all employees. Less than 20% of the corporations would allow their board members to comment on the company’s social media platforms. Those that allowed comments had restrictions for what board directors or employees could post.

The survey also indicated that not all board directors knew whether they were allowed to post comments on the company’s social media pages. About 30% of the companies stated that their customers, employees or board members had reported to them about something they’d seen on the company’s social media accounts.

Taking the Big Data Perspective

Big data refers to large volumes of structured and unstructured data generated from diverse sources in real time. Corporations, including about half of all large-cap companies, are paying more attention to big data.

Big data is too extensive for any traditional means of gathering data to capture and process it in a timely manner so that boards can make use of it. Technology makes it possible to gather real-time data from diverse sources and combine it to form a clearer picture of risk. About 33% of boards educate their directors on big data and 48% don’t.

Just under half of the corporations said that they received training on big data, as compared with 23% of mid-cap companies and only 7% of small-cap companies.

Increasing Cybersecurity Awareness

Numerous media reports of data breaches over the last several years are making cybersecurity awareness a hot boardroom topic. Hackers are becoming increasingly sophisticated in their strategies for breaking through security barriers. As companies grow, the need to increase the amount of personal information they collect grows with it. Increased information gathering sets the state for a risk of attack.

Mid- and large-cap companies were more likely to have a higher degree of cybersecurity awareness. Companies of every size are attempting to increase their knowledge of cybersecurity awareness.

The responsibility for cybersecurity risks and attacks often rests squarely on the shoulders of the CIO or the CTO, as they’re usually the parties that report risk analytics back to the board.

Board Management Software Systems

Ultimately, regardless of their approach, boards of all sizes can get the best handle on improving risk analytics by implementing the use of a board management software system such as Governance Cloud by Diligent.

Governance Cloud is a suite of software solutions that are fully integrated with a board portal system. Boards that take a full board approach to risk analytics can use the portal as a secure platform from which to collaborate and communicate on bid data and little data. Diligent Messenger is a communications application that offers tight security to keep board discussions confidential.

Boards that take a committee or a multi-committee approach to improving risk analytics can use the portal as a virtual meeting space in which they can share reports and documents remotely and in real time. The portal has built-in, high-level security features to protect against hackers.

Diligent Boards offers unlimited secure and cloud-based document retention capabilities. Electronic filing systems are also a secure place to store the company’s social media policy.

Technology is creating ways for boards to get a comprehensive, detailed view of large amounts of useful data, which they can use as a valuable aid in strategic planning.  A board management software program like Governance Cloud is the best platform from which boards can do the challenging and multifaceted work of improving risk analytics in a secure, online space.