Professional Documents
Culture Documents
OVERSIGHT
Board of Directors
Proposes
CORPORATE STRATEGY
Reviews
Develops
BUSINESS MODEL
Tests
Identifies
Monitors
Identifies
RISK MANAGEMENT
Reviews
CORPORATE STRATEGY
Identify the organizations overarching mission.
Identify the process by which the company expects to create long-term
value.
Scope:
Markets:
Advantage:
Resources:
Environment:
Stakeholders:
BUSINESS MODEL
Develop a causal business model that explains how the corporate strategy
translates into shareholder value.
A business model links specific financial and nonfinancial measures in a
logical chain to delineate how the firms activities create value.
The business model lays out a concrete plan that can be tested through
statistical analysis.
It then provides the long-term basis for measuring management
performance and awarding compensation.
CHALLENGE/ACHIEVEMENT
WORKLOAD/LIFE BALANCE
+++
ASSETS INVESTED
++
+
RESPONSIVENESS
+
+
CUSTOMER SATISFACTION
+
SENIOR LEADERSHIP
WORK ENVIRONMENT
++
+++
TRUSTWORTHINESS
+
KNOWLEDGE
CUSTOMER RETENTION
OTHER METRICS
EARNINGS
61%
3%
SALES
24%
4%
PROFIT MARGINS
7%
INDIVIDUAL PERFORMANCE
13%
RETURN ON ASSETS
4%
9%
RETURN ON EQUITY
8%
3%
RETURN ON INVESTMENT
18%
OTHER
80%
CASH FLOW
11%
2%
OTHER
17%
NUMBER OF COMPANIES
1,128
Precision:
Verifiability:
Objectivity:
Dimension:
Interpretation:
RISK MANAGEMENT
Risk management is the process by which a company evaluates and
reduces its risk exposure.
COSO framework on risk management:
1. Internal Environment: Philosophy toward risk.
2. Objective Setting: Evaluate strategy in this context.
3. Event Identification: Examine risks of each opportunity.
4. Risk Assessment: Determine likelihood/severity of each.
5. Risk Response: Identify actions to deal with each.
6. Control Activities: Policies to support each response.
7. Communication: Create information system to track.
8. Monitoring: Review data from system and take action.
Committee of Sponsoring Organizations (1990)
2.
The board evaluates the companys strategy and business model in the
context of the firms risk tolerance.
3.
4.
The board should satisfy itself that management has developed necessary
internal controls and that procedures remain effective.
AICPA (2014)
BIBLIOGRAPHY
OECD. Principles of Corporate Governance. 2004.
Financial Reporting Council. The U.K. Corporate Governance Code. 2012.
NACD. Public Company Governance Survey. 2014.
J. Carr Bettis, John Bizjak, Jeffrey Coles, and Swaminathan Kalpathy. Performance-Vesting Provisions in Executive Compensation.
Social Science Research Network. 2013.
Deloitte. In the Dark: What Boards and Executives Dont Know about the Health of Their Businesses. 2004.
Deloitte. In the Dark II: What Boards and Executives Still Dont Know about the Health of Their Businesses. 2007.
Committee of Sponsoring Organizations. 1990.
American Institute of Certified Public Accountings (AICPA). Report on the Current State of Enterprise Risk Oversight: Opportunities to
Strengthen Integration with Strategy. 5th Edition. 2014.