Across the boards: views from the financial services boardroom

May 2016

Overview

Look around the boardroom. What’s working? What could be better? In our 2015 Annual Corporate Directors Survey, we asked financial services directors to tell us about the challenges they face. And they did: we heard candid opinions about succession planning, activists, risk management, cybersecurity, and more. How can boards get better at what they do? How can directors stay on top of a flood of information and make their oversight role more manageable? See how your board stacks up.

In the history of corporate America, few director groups have been subject to more regulatory scrutiny, risk, and stress than those of banking and capital markets (BCM), insurance, and asset and wealth management (AWM) firms. And it’s not getting any easier. With so much information for FS directors to absorb, so many risk-related tasks to embrace, the job can seem overwhelming. Managing it all is a team effort. Boards are getting more involved than ever putting those teams together, monitoring the talent pipelines within the organization, and thinking about the qualifications and competence of fellow directors. The stereotypical bank board has given way to a more diverse group with a wider variety of backgrounds, skills, and experiences.

             

Our survey shows that FS boards are responding to these and other challenges with growing amounts of diligence and time. Among the key findings:

  • Directors are working to improve the quality of their boards. Roughly two fifths of FS directors would like to see director changes on their board. And, as challenges increase, most FS directors believe their boards should devote more time to director succession planning. Certain skill sets, including risk management, cyber risk, and technology, are in especially high demand.
  • FS boards are talking more often with large shareholders and activist investors. Sixty-seven percent of FS directors say their boards regularly communicate with their largest shareholders; 31% of boards interacted with an activist within the past 12 months, compared with 23% in 2014.
  • IT strategy and spending are garnering more board-level attention. FS boards are providing more oversight in IT budget-setting and major project implementations, and ramping up oversight of strategies involving new technologies and channels, such as social media.
  • Cybersecurity is a major preoccupation for many FS boards. More than a third of BCM directors say their boards spend at least 10% of board time discussing cybersecurity. Even so, only about 40% are “very comfortable” with their cyber risk efforts and 38% of FS directors say their board has discussed an actual cyber breach in the past year.
  • FS directors are confident in their boards’ risk management abilities, but there is room for improvement. Forty-four percent rate their boards’ practices as “excellent,” but 55% say more time should be devoted to risk management.
  • The job is getting more taxing. Nearly a third of FS directors devote at least 16 hours per year to outside education. Most say the mechanics of board meetings should change to be more spontaneous and less scripted or controlled.


Given the challenges, everybody at the table is expected to contribute. FS directors need to have the skills and time to do the job effectively, as well as the ability to adapt as priorities change. Fortunately, there’s no need to go it alone. There are steps directors can take to stay on top of reporting, hold more productive meetings, and more. By focusing on industry leading practices, they may find that they get better results and enjoy the process more. That’s a benefit for everyone.

Contact us

Paula Loop
Leader, Governance Insights Center
Tel: +1 (646) 471 1881
Email

John W. Stadtler
US Financial Services Leader
Tel: +1 (617) 530 7600
Email

Michael Alix
Financial Services Advisory Risk Leader
Tel: +1 (646) 471 3724
Email

Joseph Nocera
Financial Services Cybersecurity Leader
Tel: +1 (312) 298 2745
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Paul DeNicola
Managing Director
Tel: +1 (646) 471 8897
Email