Boards are more receptive than ever to conversations about good corporate governance, with recent events including the pandemic and the war in Ukraine highlighting the need to manage significant risks and deal with major uncertainty.

Peter van Veen, ICAEW’s Director of Corporate Governance, says a string of disruptive events over the past few years – including the UK’s exit from the EU and the COVID-19 pandemic – has highlighted the valuable role that boards bring in acting as a sounding board to the business at times when it is likely to be too distracted with ‘fighting fire’ to see the bigger picture.

“My experience has shown me that the bigger the crisis, the less management can see the wood for the trees, the more you focus on the short term and the more you focus on survival. It becomes a full-time activity to keep your head above water,” van Veen says.

What the pandemic showed is that things can change quite quickly and unexpectedly, he explains, and that can have a massive impact on your business and on your entire value chain. “A board isn’t there to tell the management off for not getting it right. I don't think that's helpful. But what is helpful is that you are the sounding board for management, and that you can help them think about things more broadly and make introductions to other avenues where necessary.”

The ramifications of the 2016 Brexit vote may have taken a while to unfurl, but the scale of uncertainty and complexity it unleashed on business continues to be felt by those sourcing from or selling to the EU market. In contrast, the COVID-19 pandemic escalated to lockdown in a matter of weeks. But the business uncertainty the two events provoked has succeeded in propelling risk management up the list of corporate priorities, van Veen says.

“It’s about building in risk, building resilience, stress testing of business models and making sure you don’t blindly accept the usual ‘hockey-stick’ forecast. Organisations need realistic projections, with business plans that include preparation for the worst-case scenario – as well as highlighting things that could potentially disrupt that business plan. It’s about how you can manage those risks in advance.”

Van Veen says that boards have a pivotal role to play in helping their management teams manage risk by asking the right questions at the right time. “It's about preparedness and business continuity planning: ‘What's our backup plan?’ ‘Should we start to move to a different business model because we no longer have confidence that our existing model will survive?’ Those are the kinds of questions that the board needs to be asking the management.”

With rising inflation and interest rates giving cause for significant business concern, finance has a role to play in modelling the impact of changes to help businesses better mitigate cash-flow fluctuations, van Veen adds.

“Finance teams can provide a reality check. So, if a business plan is relying on 3% economic growth and you believe that to be unrealistic, then clearly there's a responsibility to say model this at 1%, or 0%, but also -5% and see what happens. 

“Finance can also help the business with new investments and new business ideas by thinking through the financing available; there may be alternative financing methods, small business loans that the government is underwriting, or tax incentives to invest in certain parts of the UK. All of those things can really help the business think through its options.”

Meanwhile, the need to conduct business in a sustainable way needs to be factored into decision-making. “Sustainability isn't just about saving electricity and having less impact on the environment – it's also about how you move away from short termism, taking the long-term view and ensuring that you're making a positive contribution to society and the local communities where you operate.”

ICAEW’s Corporate Governance community provides an unrivalled platform for members. “The depth and breadth of experience among members is incredible,” says van Veen. “We have 400 members on the boards of FTSE 350 companies and thousands of members who sit on boards of smaller entities. Most of them are very happy to share that knowledge with fellow members.”