Ryan McCarthy has been thinking a great deal about the role and function of the board in recent times.
As a senior audit partner with KPMG, he has engaged with the boards and leadership teams of some of Ireland’s biggest and most successful publicly listed companies. And as a long-time member of the firm’s Private Enterprise Team, McCarthy has also worked with a wide variety of privately-owned companies also.
McCarthy, a KPMG partner since 2010, is now taking that experience to a new role with the KPMG Board Leadership Centre. KPMG operates the Centre in a number of other countries, but it is now coming to Ireland with McCarthy taking the lead on the project.
It is why he has been spending an increasing amount of time wondering what is – and should be – keeping board members awake at night.
“We engage a lot, with a lot of CEOs and the CFOs of firms, from advising them on expansion to helping them navigate their businesses through difficult times,” McCarthy said.
Executives can also lean into the support and expertise of the board. But that same sort of support is often not there for non-executive directors. That is something we hope to change.
The Board Leadership Centre
That is where the KPMG Board Leadership Centre steps in. McCarthy likens it to a forum for board chairs and directors, a place where they can share information, swap advice, and trade war stories.
According to McCarthy, the Centre is aimed at the board members of PLCs, semi states, large corporates, sizable family business, as well as “organisations who are interested in really good governance”.
The Board Leadership Centre is essentially a forum for board members with peer-to-peer networking opportunities, with McCarthy stating that it would also allow members access to the wider KPMG global network and experience. “It is about helping people with critical boardroom challenges and helping them to drive their board’s agenda,” he said. “We will share information, new regulatory requirements, and be there for board members.”
Moving beyond theory
The roll out of the new Centre comes at a time of heightened scrutiny on the role of a board and on the importance of corporate governance.
The vast majority of board members take on the position with the best of intentions. However, as McCarthy sees it, it is crucial that board members are asking the right questions and focusing on the right areas, as opposed to just following the agenda being pursued by those reporting to them.
“In terms of risk management and in terms of strategy, board members need to be clear that they are focused on the right areas. Is the lens into the future going far enough? Are they too focused on short term issues to properly understand and deal with the issues that could pose an existential crisis to the company?” he said.
“Some of the classic risks won’t sink the ship. So, the question is: are boards focused on the very narrow range of really big things that could cause major corporate damage? I think that is the challenge.”
According to McCarthy, most boards were not anticipating a pandemic or a war in Ukraine. But those two events have been dominant themes in the boardrooms around the world in recent years.
However, he said that companies that had spent significant time preparing a risk register, and modelling out potential impacts, had fared better than those who had not, during that period.
“The role of the board is to challenge, approve, and hold to account on strategy. It is the executive who execute the decisions,” he said. “So, the board needs to concentrate on the important issues, and not get too caught up in the weeds. But on those important issues, they need to be thoroughly across the details.”
He added: “The board needs to know that the company is in a position to manage the top three, four or five risks that could capsize the company. And they need to be clear about what those risks are. They are the people who move something from a theoretical risk into an actual risk. And then it is about having honest conversations at a board level and challenging the management team on their plans.
McCarthy said that the pace of change in the world of business was accelerating at breakneck speed, and that it is becoming increasingly important for CEOs and their boards to develop multidisciplinary teams of experts so that they can critically evaluate how well placed they are to deal with the various fluctuations and challenges.
“It’s one thing to talk about change, but you can’t manage risk if you don’t understand what’s happening. I believe we’ll see boards increasingly challenge the skills, expertise and insight that businesses have at their disposal,” he said.
“They need to know that the strategies in place are robust and will protect the company. There are no silver bullets to a lot of the problems. But you must be as prepared as you can.”
Long term versus short term
Having worked with boards for many years, McCarthy has seen a wide variety of approaches. Some work. Some, he believes, do not.
A key point, he said, was the amount of time that board members give to assessing risks and strategy as opposed to just receiving operational updates.
“In some organisations, board members get huge volumes of paperwork in advance – hundreds and hundreds of pages. And they are expected to get through them,” he said.
“And you have to wonder, if you have to get through all that documentation, is there enough time to have high quality discussions within the boardroom, about where the company is going, how it intends to get there, and to mitigate the risks that could truly damage the business.”
Engaging with the management team
Likewise, he said it was crucial that board members strike a balance between dealing with the management team and talking to other people within the organisation who would not normally get access to a board member.
“To really get under the bonnet of the business you might have to talk to more people as opposed to just looking at the P&L or the CEO PowerPoint,” he said, adding that it was important that non-executive board members did not try to take on the responsibilities of executives.
McCarthy said: “The best executive teams that I have ever worked with, have really thrived and cherished board challenges – the right sort of board challenge. You must have the highest quality board possible, and that allows you to have the highest quality exec team. They go hand-in-hand. They need to be able to challenge each other.”
Likewise, he said that if a company lacks the right skills on the board, it could cause significant issues. “You do not want a situation where the management team can go effectively unchecked,” he said.
McCarthy said the right board was one determined not just to tick the boxes and claim a fee, but to truly challenge the management team to drive the business forward. “A good company has a good open forum at a board level,” he said. “If that happens, it will help the company thrive.”
This article first appeared on The Currency and is re-produced here with their kind permission.
Get in touch
If you have any queries about getting the right board in place in your business, please contact Ryan McCarthy of our Board Leadership Centre.
We'd be delighted to hear from you.
Ryan McCarthy
Partner, Board Leadership Centre Lead
KPMG in Ireland
