The difficult question of how boards should deal with the financial crisis is discussed by top consultants Ram Charan and Tom Neff via an interview by Geoff Colvin at Fortune.
Charan believes targets for management must be rethought. He warns that old targets cannot be used with small modifications and that "in this era, survival may be an issue".
He adds that the peer group against which a company is compared must be reassessed: "Some of the old peers may be insolvent or may not be relevant because conditions have changed dramatically," he explains.
Neff believes boards should "spend more time thinking about the unthinkable - scenarios that would have seemed irrational, maybe unimaginable, just a year ago".
According to Neff, boards also need to place more focus on enterprise risk management; they need to think about the risks inherent in the business model, and the global risks that could affect their business.
Both consultants agree that the challenges and demands of being a director will increase greatly as the financial crisis develops further.
Neff says: "The time demands have changed significantly. It's routine now for boards and board committees to hold telephone meetings in between the regular meetings, and as the time commitment increases, the availability of certain people to allocate that time is just not there."
Charan observes: "People are beginning to realise that boards can create value, and that some boards, by commission or omission, can destroy value."
What boards must do in the crisis
Geoff Colvin, Fortune, 29/01/09
