Directors Concerned With Risk Oversight - Report

Corporate boards in the US are giving more attention to their risk oversight responsibilities, while most boards are still not discussing corporate social responsibility issues, according to PwC’s 2014 Annual Corporate Directors Survey.

And directors say they are less comfortable with their understanding of their company’s risk appetite.

The PwC report said that looking to some less traditional boardroom topics, three-quarters of directors say they are not currently having substantial discussions about corporate social responsibility issues such as human rights and climate change.

However, the survey found these discussions are most likely to occur in the boardrooms of mega-cap companies.

The survey of 863 public company directors was conducted in the summer of 2014. Of those respondents, 70 per cent serve on the boards of companies with more than $1 billion in annual revenue.

“It was not a surprise that strategy and risk remain top-of-mind for public company boards of directors,” Mary Ann Cloyd, Leader for PwC’s Center for Board Governance said.

The PwC report highlights director sentiments related to these particular trends:

Directors are less comfortable with their understanding of the company’s risk appetite; 51 per cent say they understand the company’s risk appetite “very well” – over ten percentage points less than two years ago.

• Over 90 percent of directors are at least somewhat satisfied with the information they get to fulfill their strategic oversight responsibilities. However, in some areas there is room for improvement. More than one-quarter of directors are either dissatisfied or do not receive information on competitor strategy and customer satisfaction research.
• Over 70 per cent of directors say they made changes to their approach to fraud risk over the last 12 months. The most common actions were holding board discussions of “tone at the top,” increasing the amount of time spent on board discussions of risks embedded in compensation plans and having board members interact with members of management below the executive level.
• While a number of organisations have identified issues like sustainability and climate change as societal imperatives about three-quarters of directors say they have not had substantial discussions about human rights, climate change, carbon emissions and resource scarcity.
• Over the last three years, directors have become more comfortable with the allocation of specific responsibility for overseeing major risks between the board and its committees. In 2014, 84 per cent said there was a clear allocation of responsibility, up from to 80 per cent in 2013 and 63 per cent in 2012.

The survey findings specific to directors’ views of strategy and risk oversight, go to: www.pwc.com/us/directorssurvey.