Dennis Holt is Chairman of Beazley and the Co-operative Bank. He was previously Deputy Governor of the Bank of Ireland and Chairman of Liverpool Victoria Friendly Society.
The key to an effective board is its ability to balance risk and opportunity. In financial services the focus is rightly on risk mitigation, ensuring we protect our customers and shareholders, and provide the necessary assurance to the regulators. But the focus on risk shouldn’t crowd out discussions on strategy or on opportunities to grow and improve the business. Getting that balance right is critical, but it’s not easy.
Boards have changed hugely over the past 10 years. The topics on the agenda and the conversations in the boardroom are now completely different - and rightly so! For instance, there is a much greater focus on identifying risks, providing challenge to executives and understanding the impact of our decisions on the wider economy. I support this change of focus as it’s appropriate to the environment we now operate in.
The best company secretaries I’ve worked with are excellent observers. They have a unique vantage point to identify the risks and opportunities facing the organisation. And a good chairman will value their perspective, encouraging them to be the conscience of board.
It’s vital. For me, good information is a matter of accuracy and timeliness: I need to have complete confidence in the numbers and I require all papers to be issued seven days before a meeting. That isn’t because I’m a slow reader, but because directors need time to think about the topics so that they’re properly prepared for the meeting.
The smartest decisions I’ve witnessed have been deciding what not to do, rather than what to do. As an early example, when I was at Lloyds in the mid-1980s, all the big banks were leaping at the opportunity to adopt investment banking. Our CEO, Sir Brian Pitman, decided that the model didn’t make economic sense for us and chose not to go for it. At the time, the decision was challenged by investment managers. But in hindsight, it was an excellent decision which protected us from unnecessary, and potentially harmful, volatility.
The UK’s global influence will change significantly over the next decade but this has very little to do with Brexit! In the business world, the profile of countries like the UK who outperform relative to population will inevitably diminish – and if you go to any city in Asia, you’ll see why. The vibrancy and productivity of Asian markets is staggering, although the risk of a bubble is also high. Whilst a decline in the UK’s global influence may be dressed up as a fallout from Brexit, I think it will only exacerbate forces that were already at play.
I’ve just finished reading Conquerors by Roger Crowley. It looks at how Portugal, a marginalised European country, found the best route around the Cape of Good Hope at the turn of the 15th century to control trade in the Indian Ocean. I’m incredibly impressed by their foresight and success, particularly from a basis of such little knowledge.
Parallels should be drawn to today’s business world, for instance, how can we transform unknowns to knowns so we can manage them effectively?
As a non-executive director going into a struggling company, the first thing to do is look at the key decision makers and identify who’s part of the problem and who’s part of the solution. Move on the former group with dignity, and give the latter the space to deliver. This rule has served me well over a career that has included several turnarounds.