Should boards change the way they work?

Manil Jayesinghe

Kamini Reddy

Harin Wijeratne

D. Soosaipillai

Companies and their boards are under intense scrutiny from shareholders, regulators, employees and other stakeholders. In times of uncertainty, the roles and responsibilities of a Director are even more demanding and boards are required to go beyond the basic oversight function in order to be effective. 

The Sri Lanka Institute of Directors (SLID) hosted a webinar titled ‘Should Boards Change the Way they Work?’ which discussed the board experiences of a panel of independent non-executive directors (INEDs) representing a few of the worst hit sectors in the recent months. 

Moderating the session, Partner, EY and President of the Institute of Chartered Accountants of Sri Lanka Manil Jayesinghe, highlighted the key trends which have emerged and made major impacts on businesses in recent times.

From overall disruption in business to permanent changes in society to company structures and geo-political links to impacts on supply chains, the COVID-19 pandemic has provided an extra-ordinary, never-seen before, backdrop to doing business. He stated that the response to these challenges lie in a company’s agility and its ability to respond on the run. 

Expressing her experience on the broad spectrum of challenges facing the hospitality and tourism sector, Kamini Reddy, representing a family owned group of companies located in the Pacific Islands and an Independent Non-Executive Director (INED) of Jetwing Symphony PLC, stated that as an INED, her focus was on cash flows and the survival of companies with the high overhead costs to be managed. 

She went on to state that making decisions which affected people’s livelihoods was one of the biggest challenges for her personally, where large numbers of people were made redundant as a result of the closing of borders during the pandemic. Reddy also commented that sourcing of health and safety equipment and training of staff were a few of the measures which had to be adopted within a short period of time. 

The apparel sector being one of the worst hit sectors, continues to see weak order books, with second waves of the pandemic affecting Sri Lanka’s major export markets. Commenting on business dependency and the uncertainty around not knowing which of your customers would fall off the cliff, Harin De Silva Wijeyeratne an INED and Audit Committee Chairman of MAS Holdings PLC, stated that liquidity was the real crisis and of paramount concern for directors on the boards of apparel companies. 

He also spoke of the proactive measures and strict controls taken to contain the spread of the virus, whilst ensuring the physical and mental well-being of employees. “More regular communication, with management playing the major role in ensuring compliance across the entire company” is how Wijeratne summarised the role of INEDs in the companies represented by him. He also commented that supporting the mental health of employees was critical to creating a safe physical environment and had featured on the board’s agenda.

Elaborating further on the issue of mental health, Reddy was of the view that focusing on it was extremely important during the readjustment phase with clear and frequent communication on the company’s response plans, from social distancing to wearing personal protective equipment (PPE), as well as details about the workforce and financial stability. 

The post COVID-19 business environment requires a new way of thinking about risk and transformation. It requires risk management to be more dynamic. At the board level, this translates to adopting a future-fit risk approach that is more attuned to external business trends and one that allows management to focus on identifying and capitalising on risks that enhance trust and enables innovation and value creation. 

Soosaipillai, an INED on a number of banking and financial institutions, was of the view that while boards were thrown into the deep-end overnight, from cyber security threats to a volatile geopolitical landscape and pandemics, the situation had put pressure on boards to build risk resilience and create long-term value for their companies. He stated that it was important for boards to address the top risks associated with the protection of information assets instead of leaving the CIOs to act in isolation. 

Companies today must embrace technological innovations to survive and transform and board members must clearly acknowledge this. While this provides strategic opportunities for companies, it also introduces new cyber and data privacy vulnerabilities, creating an increasingly complex cyber security landscape. Cyber security is not a regular discussion item on board agendas which gives rise to an urgent need for oversight of this existential threat. 

The current crisis sheds light on the vital importance of a diverse board. A board with a breadth of experience, relevant industry and functional expertise, and a range of ages, genders, and backgrounds would enable an organisation to assess challenges from a variety of perspectives. Boards should seize this moment to step up their game and provide critically needed guidance to their organisations.