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NED Training

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Published: 5th April 2017 by William Webster

Some people have specialist skills. Others are more rounded. That’s the way things are but it can cause concern. In particular, when NEDs have limited knowledge on which to draw when discussing specialist topics like treasury, markets and risk.

The Background

The financial crisis resulted in regulatory pressure to re-evaluate the sources and levels of risk being run by the client. This ongoing requirement was a challenge for the NEDs. They were under regulatory scrutiny and whilst having broad experience it was acknowledged that their understanding of financial markets and the risks therein required improvement.

The Risk

There’s a lot at stake for both the firm and the individual. In the current environment, just a sniff that governance is not all it should be will cause problems. It means limits on what you can do, more reporting, higher buffers and increased costs. It can also lead to an overhaul of the governance structure itself. This is preventable.

This was Barbican Consulting’s solution

The Proposal

Five two hour sessions (presentation and discussion) for NEDs undertaken over six months. They focused on the risks in the client’s business and the Board’s information packs. The sessions were:

  • The Role of Treasury
  • Liquidity & Credit Risk
  • Market Risk
  • Management Information
  • Governance & Treasury

These were "high level" and covered the issues NEDs needed to know about in order to have a meaningful discussion about treasury, markets and risk.

The outcome

Full engagement by the NEDs in the workshops leading to an improved understanding of the risks faced by the business, how those risks were measured and importantly an appreciation of weaknesses in the way risk was reported.

This led to greater internal debate on key issues. Including some that had been raised by the regulator particularly sustaining the business in times of stress and demonstrating flexibility within the balance sheet.  

A further outcome was modification of the board pack after it was recognised that some of the information it contained was superfluous.

You may ask whether you can do this yourself. The simple answer is yes. But there are three drawbacks. First, the time it takes to put it together. Second, ensuring that is communicated in a way NEDs understand. Three, independence – NEDs like to hear from a third party.

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