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Highlights from KPMG’s Corporate Governance Board Summit

Recently, I participated in KPMG’s 12th Annual Audit Committee Issues Conference at the Ritz-Carlton in San Francisco. The event – Governance Challenges & Priorities Driving the 2016 Agenda – spanned two days and covered several pressing topics that corporate boards are currently facing and will encounter in the near future.

I had the pleasure of joining Ken Daly, CEO of the National Association of Corporate Directors (NACD), and Tim Flynn, board director at J.P. Morgan and Walmart, on a panel titled, “Thinking Differently: The Changing Boardroom Conversation.” We had an interesting and candid dialogue on the changing role of boards and management teams amidst technology-driven seismic shifts in consumer behavior.
Here are two particularly important takeaways:
The need for an offensive – not simply a defensive – mindset
3A8A1354Tim spoke about the current challenges that corporate boards are facing and the need to balance the giving of insight versus oversight. Piggybacking on his comments, I discussed how in times like these of fast-paced disruptive innovation, boards and management teams must shift from a defense-only model, maintaining status quo core businesses, to also playing offense, taking risks, experimenting with new customer engagement models, and – above all – embracing technology. In regulated industries in particular, it’s all too easy to use regulatory compliance as an excuse, but the greatest risk of all is doing nothing.
The importance of shifting to new business models
In the face of these challenges, boards and management teams should not merely delegate social, mobile, and digital innovation to a designated “digital director” on the board or to IT or a social media marketing team and think they have it covered. Boards must instead personally understand and use these emerging technologies in order to experience the world as their customers and employees do, and think not only about creating Twitter pages, for example, but potentially entirely new business models spanning multiple channels that appeal to today’s always-connected, social customer over time.
To read more about KPMG’s conference, check out the full program.
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Social business: Bridging the gap between strategy and governance

Altimeter Social Business Governance Figure 1As more and more businesses continue to implement social business into their overall strategy, the issue of social business governance is becoming a hot topic. What is social business governance? It’s the set of people, policies and processes that define how an organization executes its social business strategy.
Last week Altimeter Group published a new report on social business governance, exploring the relationship between governance and strategy while outlining some best practices for social business. It’s an illuminating report and I’d like to highlight some of the key findings on how this relates to our customers in financial services.

The gap between strategy and governance

One of the report’s more startling findings was the fact that, while social business strategy is well-developed and recognized as important, most survey respondents don’t believe that governance is well-defined and communicated across their organizations:

  • 53% of survey respondents agree that social business strategy forms the basis for governance
  • Only 16% of respondents believe that governance is well understood and deployed throughout the organization

In short, we still have a long way to go in terms of developing governance that is well-defined and fully supports an organization’s social business strategy. This is an even more critical issue for financial services organizations that operate in high-risk environments, as governance plays a critical role in preventing and mitigating risk.

Why we need governance

So why is it important to have governance that is clear, consistent, and understood throughout the organization? Altimeter lists several key drivers of governance within the report, but I’d like to call out a few that are particularly important to our customers:

  • Empower Employees: As consumer expectations shift, allowing employees to to engage in social channels to grow their business is a critical new piece of business strategy. Proper governance allows these employees to represent their firm and brand in an appropriate and safe manner.
  • Employee Use of Social: Recruiting the next generation of financial professionals is another important issue for many of our customers. Employees now expect to be able to utilize social media to communicate and work, as illustrated by this quote from Shel Holtz (principal of Holtz Communication + Technology, @shelholtz): “Telling a Millennial to use email is like telling someone 10 years ago to type up a memo and drop it off in the mailroom.” Social business governance enables employees to use the social tools that they want to, which in turn helps organizations recruit Millennials and beyond.
  • Regulations: Particularly for our customers within financial services, regulatory and compliance requirements drive a need for strong governance within those organizations. Without well-defined governance in place, organizations risk running afoul of both existing and emerging regulations.

Improving your governance

The report presented a system for social business governance called the 4 P’s: People, Policy, Process and Practice. It’s a great framework for thinking holistically about your governance; below is a high-level overview of the various components:
Altimeter Social Business Governance Four P's
For a more in-depth exploration of each of the “4 P’s” check out the full report.

The evolution of governance

I’d like to leave you with a great chart from the report, showcasing how an organization evolves its social business governance from a decentralized model to a hub & spoke model.
Altimeter Social Business Governance Evolution
Where is your organization along in its social business evolution? What issues are you grappling with as you build and refine your social business strategy? Let us know in the comments below.