Championing Diversity and Inclusion from the Top

Anna Catalano

Investors, legislators, and director peers around the world notice that diversity and inclusion practices are slow to be adopted. While adopting diversity from the highest level of the company appears as a challenge for some boards, it is one worth overcoming. Enter Anna Catalano, a respected director and champion of greater inclusion of people of diverse backgrounds and perspectives in American boards and on boards around the world.

Catalano, an active corporate director with more than 30 years of experience, is a director of Willis Towers Watson, Kraton Corp., and HollyFrontier Corp., and advises still more companies. She is an NACD Board Leadership Fellow and board member of the NACD Texas Tri-Cities Chapter. In her work in the nonprofit sector, she is a director of the Alzheimer’s Association, the Houston Grand Opera, and is an honorary co-founder of the Kellogg Innovation Network at Northwestern University.

Catalano’s global business leadership experience is deep: she has held executive positions in Asia, Europe, and North America. She also is a proud champion of women in business and understands the role of diversity and inclusion in companies’ ability to innovate.

NACD caught up with Anna Catalano to speak with her about diversity in the boardroom prior to NACD’s 2018 Global Board Leaders’ Summit.

NACD: Having held executive positions in Asia, Europe, and North America, how has working internationally influenced you?

Catalano: Living abroad really changes your perspective on the world. If you have the opportunity to work and live internationally, you should do it. An international perspective is crucial for members of boards at companies that are global or are considering expanding into global markets. It’s important that companies recognize that not all countries develop in the same ways. If you have experiences working and living in different countries, it can help you understand how countries develop and what different populations are interested in within that market. One thing that has been reinforced for me in my global experience is that in spite of cultural differences across the globe, we all care about our families and our communities. I believe that perspective is needed on boards, and sadly it’s really missing in many.

NACD: You’ve been recognized in Fortune’s ranking of “The Most Powerful Women in International Business” and shared your thoughts on International Women’s Day on your blog. What advice do you have for female board members working to expand their international board portfolio? How can women break into the boardroom?

Catalano: It is crucial to get more women to serve on boards of all types and in all industries. If a woman is not on a board and is looking to join, I would advise her first to continue growing her experiences and seek out learning opportunities. My advice to people who want to get on their first board is to make sure you have a good story to tell about why you’re qualified and what makes you a desirable candidate. It’s imperative to be distinctive and able to add value to the strategic conversation. Second, you have to figure out how to become top-of-mind. You want to be the first person a recruiter or another director thinks of when a position opens up. How do you do that? Form relationships. The first time you call a recruiter should not be about how you’re going to get onto a board. If you wait until you are 55 years old before you develop a relationship with a recruiter, it’s probably too late. Start early and build relationships over time. Most importantly, women who already sit on boards need to help other women.

NACD: Implicit bias and the idea of the bias of crowds hardwires a lack of inclusion into organizations. What steps can a board take to get serious when it comes to diversity and inclusion in 2018?

Catalano: Directors on a board need to understand deeply what diversity and inclusion are. It is not about numbers or getting a certain percentage of women or people of color in certain positions. The concept of understanding bias around diversity and inclusion requires delving into why you make certain choices and assumptions about people. My take is that in the majority of instances it’s not intentional or malicious that women are primarily in functional roles and that men are primarily in profit and loss roles. Boards need to examine and understand why these trends happen, and that be willing to invest time into the process. If you ask most board members if they understand diversity and inclusion at their company, they will say they do but then they cannot really explain it. It is crucial to invest in learning about and understanding diversity and inclusion and having a board chair willing to spend some quality time on this topic.

 

Don’t miss out on the continuation of this discussion at the 2018 Global Board Leaders’ Summit, happening September 29 through October 2 in Washington, DC. There will be plenty of opportunities at Summit to discuss the future of the economy, globalization, and much more. Register by June 30 to take advantage of the early bird rate and save $1,000 off the registration price.

Getting the Right Cybersecurity Metrics and Reports for Your Board

In the 2017–2018 NACD Public Company Governance Survey, 22 percent of corporate directors said they were either dissatisfied or very dissatisfied with the quality of cybersecurity information provided by management.

We’re not surprised. In most cases, management still reports on cybersecurity with imprecise scorecards like red-yellow-green “heat maps,” security “maturity ratings,” and highly technical data that are out of step with the metric-based reporting that is common for other enterprise reporting disciplines.

Boards deserve better. We recognize that cybersecurity is a relatively young discipline, compared to others under the umbrella of enterprise risk management (ERM). But it’s not a special snowflake. Management can and should deliver reports that are:

  • Transparent about performance, with economically-focused results based on easily understood methods.
  • Benchmarked, so directors can see metrics in context to peer companies or the industry.
  • Decision-oriented, so the board can provide oversight of management’s decisions, including resource allocation, security controls, and cyber insurance.

While that level of reporting may still be aspirational for some companies, directors can drive their organizations forward by asking the following five questions, and demanding answers backed by the sorts of metrics and reports that we suggest below.

Before we get to the questions, there’s an over-arching prerequisite for sensible reporting: Every key performance and risk indicator should be tracked against a target performance or risk appetite, respectively.

That means defining risk tolerances in an objective, clear, and measurable way—for instance, “our critical systems downtime should always be less than one percent”—so that an analyst’s gut feelings aren’t determining results.

1. What is the threat environment that we face?

The chief information security officer or chief risk officer should paint a picture of the threat environment (cybercriminals, nation-states, malicious insiders, etc.) that describes what’s going on globally, in our industry, and within the organization. Examples of good metrics and reports include:

  • Global cyber-related financial and data losses
  • New cyber breaches and lessons learned
  • Trends in ransomware, zero-day attacks, and new attack patterns
  • Cyber threat trends from ISACs (information sharing and analysis centers)

2. What is our cyber-risk profile as defined from the outside looking in?

Boards should get cyber-risk assessments from independent sources. Useful sources of information include:

  • Independent security ratings of the company, benchmarked against peers
  • Third-party and fourth-party risk indicators
  • Independent security assessments (e.g., external consultants and auditors)

3. What is our cyber-risk profile as defined by internal leadership?

Management should provide assessments with tangible performance and risk metrics on the company’s cybersecurity program, which may include:

  • NIST-based program maturity assessment
  • Compliance metrics on basic cyber hygiene (the five Ps): passwords, privileged access, patching, phishing, and penetration testing
  • Percentage of critical systems downtime and time to recover
  • Mean time to detect and remediate cyber breaches

4. What is our cyber-risk exposure in economic terms? Based on the company’s cyber-risk profile, the central question is: What is the company’s potential loss?

In the past 30 years, we have seen that question answered in economic terms in each and every risk discipline in ERM: interest rate risk, market risk, credit risk, operational risk, and strategic risk. Now we need to address that question for cyber risk. This expectation can also be found in the U.S. Securities and Exchange Commission’s new guidance on cybersecurity disclosures and its focus on quantitative risk factors.

The Factor Analysis of Information Risk (FAIR) methodology is a widely-accepted standard for quantifying cyber value-at-risk. The FAIR model provides an analytical approach to quantify cyber-risk exposure and meet the heightened expectations of key stakeholders.

In the current environment, directors should demand more robust reporting on metrics such as:

  • Value of enterprise digital assets, especially the company’s crown jewels
  • Probability of occurrence and potential loss magnitude
  • Potential reputational damage and impact on shareholder value
  • Costs of developing and maintaining the cybersecurity program
  • Costs of compliance with regulatory requirements (e.g., the EU’s General Data Protection Regulation)

5. Are we making the right business and operational decisions?

Cyber is not simply a technology, security, or even risk issue. Rather, it is a business issue and a “cost of doing business” in the digital economy. On the opportunity side, advanced technologies and digital innovations can help companies offer new products and services, delight their customers, and streamline or disrupt the supply chain. As a top strategic issue, management should provide the board with risk and return metrics that can support effective oversight of business and operational decisions, such as:

  • Risk-adjusted profitability of digital businesses and strategies
  • Return on investment of cybersecurity controls
  • Cyber insurance versus self-insured

We believe the number should be zero when it comes to the percentage of directors dissatisfied with the cybersecurity information provided by management. Based on our own observations of board reports on the quality of cybersecurity reporting, there remains significant gaps. We hope our article will serve as a framework for directors and executives to discuss ways to close those gaps.

When Healthcare Meets Retail

Sam Glick

It seems there’s always a new article about Amazon’s latest Alexa news, or a trendy startup trying to disrupt the shopping experience. Or, more soberly, a downtown now dominated by empty storefronts. Americans living and shopping in the country that invented the modern shopping mall, the supermarket, and e-commerce seek out the latest and greatest retail experience. Traditional retailers are now getting into the health business. Amazon bought Whole Foods, a grocer that began as a health food store. Walmart is considering buying PillPack, an online pharmacy startup. Albertsons is buying Rite Aid. And, in the biggest retail healthcare deal yet, CVS is buying Aetna, bringing together a retail chain with nearly 10,000 stores and a major national health insurer.

What does all this activity mean? Will the average American soon be going to the drugstore to pick up a quart of milk and have someone look at their rash while they’re there? Will my family physician deliver care at the same place that sells my Cheerios? The short answer to both questions: Maybe.

Retail’s entry into healthcare reflects three major trends in how the healthcare industry—and consumer behaviors—are evolving:

  1. Consumers are in the driver’s seat. In 2017, the average single plan deductible for those with employer-sponsored health insurance was $1,505. Since 2006, the average consumer’s annual out-of-pocket healthcare spending has increased by 230 percent. Consumers are spending mostly their own money for basic healthcare services, and they want to see value for that money like they do in other industries. They want reasonable prices, convenient hours and locations, and great service—not exactly attributes for which traditional doctor’s offices or hospitals are known. So, they’re turning to retailers and others to meet their needs, and it’s working. Oliver Wyman research shows consumers who visit a clinic in a drug, grocery, or discount store are highly likely to return—with just the opposite being true for conventional medical offices.
  2. Primary care is being redefined. The shortage of primary care physicians nationwide has been well-documented. Yet primary care is provided by a physician in many locations beyond the traditional exam room. Providers such as Kaiser Permanente now conduct more than 50 percent of primary care visits electronically. And in the United Kingdom, through a partnership with the artificial intelligence company, Ada, the National Health Service provides round-the-clock care via a chatbot. Also, in states such as California, pharmacists are beginning to be licensed to provide basic medical services, which could have a significant impact, given that there are more pharmacists in the US than there are primary care physicians. A drugstore chain with a pharmacist on every corner, or an online retailer with an app on every smartphone, is well positioned to get into the modern primary care business.
  3. Pharmacy matters more than ever before. We’ve seen some miraculous drug innovations in recent years—from a cure for Hepatitis C to using a patient’s own immune system to fight cancer—but those innovations have been accompanied by significant increases in pharmacy costs. According to Mercer, increases in pharmacy spending are one of the biggest concerns for employers when it comes to managing healthcare costs. Yet controlling that spending requires careful coordination long after a physician writes a prescription, from ensuring drugs are being taken correctly to understanding which consumers represent most of the spending to monitoring effectiveness. (Overall, just 0.3 percent of Americans account for a full 20 percent of drug spending.) And retailers—with big local footprints, large pharmacist workforces, and years of experience with consumer analytics—are in an advantageous place to deliver real value.

What does this mean for corporate directors?

Well, for those on retailer and healthcare boards, what’s vital is making sure that experience, value, and consumer preferences remain front and center on the company’s agenda, and that a range of innovative partnership and M&A options are being considered.

In other industries, directors should be asking hard questions to probe how these retail healthcare trends are being reflected in employee benefits and the company’s role in the new retail healthcare ecosystem. Health is affected by nearly every part of a consumer’s life, from technology to transportation, to food, to housing choices. Pretty soon, every company could be a healthcare company.

 

Sam Glick is a partner in Oliver Wyman’s Health and Life Sciences practice who focuses on consumer-centric healthcare.

Five Leading Practices for Governing Innovation

Technology is eroding traditional lines between industries and creating opportunities for innovators to disrupt incumbents. Findings from the 2017-2018 NACD Public Company Governance Survey suggest that boards are increasingly concerned about how to navigate technology disruption, with one third of respondents citing this as a trend likely to have the greatest impact on their company in the coming year. The rapid pace of change presents a significant challenge for boards as they look to sharpen their oversight. As such, directors, and the management teams they oversee, are searching for strategies that will enable them to adapt quickly to shifts in the business landscape.

Nichole Jordan speaks with directors.

The National Association of Corporate Directors (NACD), in collaboration with audit and tax specialist Grant Thornton, recently cohosted a director’s roundtable in Chicago, Illinois, where directors and industry experts discussed the tactics that have helped them learn at the pace of disruptive innovation. Special guests from Amazon Web Services (AWS) were also present. Nichole Jordan, national managing partner of clients, markets, and industries at Grant Thornton, discussed the following strategies for getting out ahead of disruptors based on her engagement with clients.

1. Utilize leading technology conferences and events. There are many reputable conferences and events centered around technology and innovation that directors should consider attending each year. These gatherings bring together renowned innovators and thinkers, providing attendees with an insider view that many outside of the technology industry do not have access to. This year, NACD partnered with Grant Thornton to host a group of directors for the CES Experience, a curated, board-focused tour of the Consumer Electronic Show (CES)—the world’s largest and most influential technology show. Participants were introduced to novel products and services and spoke with their peers about potential disruptions to their companies and industries. Outside of CES, Jordan suggested that directors also attend South by Southwest and The Wall Street Journal’s Future of Everything conference, among others.

2. Visit domestic and international companies at the forefront of innovation. Corporate executives and directors can now access the innovation centers of leading technology companies including Amazon.com, Google, Microsoft Corp., and Apple. Through offerings as varied as tours of innovative hubs, executive immersion programs, and corporate strategy sessions, boards can gain valuable insights into disruptive trends and how these may impact their own businesses.

Geoff Nyheim, director of US central area at AWS, provided an example of an insurance carrier taking advantage of Amazon’s offering. The insurance carrier was particularly concerned with the predicted growth of autonomous vehicles and the potential impact on their industry. The CEO brought his direct reports to AWS, where they spent three days talking through strategy under the premise that insurance claims would plummet due to disruption caused by the safety of autonomous vehicles. According to Nyheim, “when [operating under] that assumption, all sorts of different paths and creative ideas emerged” for the future of the company. Nyheim added that “a lot of other companies are in the same place, [but to their detriment] lack a similar urgency.”

One director commented that it’s just as important for boards and their management teams to get out of the country to visit innovation centers in India, China, and other emerging markets as it is to visit the ones to home. On such a trip to India, the director visited a General Electric Co. factory that produced equipment used to create computerized tomography (CT) scans, and was amazed by the advanced tools and research that he saw. Directors should find ways to experience a similar sense of wonder that’s applicable to their own industries.

3. Cultivate a collaborative business mentality. Though possibly counterintuitive, businesses need to consider building a sustainable ecosystem of partners for themselves. Jordan called out companies in Grant Thornton’s ecosystem, naming, “Amazon Web Services and NACD as partners.” Directors should challenge members of management to consider developing a set of networks, partnerships, or alliances that can be tapped into to generate and implement innovative solutions. One director agreed, citing an internal study at his company which found that “less than five percent of ideas [generated within the company] actually came to fruition.” The company makes large investments in research, leading the director to conclude that part of the problem may be that it is relying too heavily “on [its] own resources and [is too] unwilling to trust others to help in the innovation process,” one director said. He also briefly outlined how companies can leverage networks to collaborate with a trusted supplier. The tactic assumes that a supplier “gets ten percent of revenue from [your company, so you ask the supplier if they would be willing to] take that ten percent and put it towards creating products for [your company].” This kind of thinking can lead to mutually beneficial and innovative engagements that enhance operational effectiveness.

4. Integrate technology briefings into your daily routine. Directors should be purposeful about incorporating reading about technology into their everyday lives, and can do so by seeking out reputable publications that report on the business of technology. The Wall Street Journal’s technology department, Recode, TechCrunch, and Wired magazine are widely considered reliable publications that bridge the gap between management and technology. Following leading organizations and their CEOs on social media—Jeff Bezos, Elon Musk, Shelley Palmer, or Gary Shapiro, for instance—can also enrich directors’ technology diets. One participant observed that maintaining relationships with individuals in late-stage venture capital funds can also facilitate learning. Venture capitalists “evaluate hundreds [if not] thousands of proposals,” she said, and could keep directors apprised of bleeding-edge developments.

5. Monitor your company’s progress on innovation relative to its customers. Effective benchmarking of technology initiatives’ success will vary from company to company. As such, innovation efforts should be wedded to the current and future needs of its customers. Jeffrey Traylor, head of AWS solutions architecture for the US Central area at Amazon, Traylor suggested Amazon’s value of working backwards as a strategy for customer-centered innovation. “Before we [even] write the first line of code, we write a press release for three years from now, then write an FAQ,” Traylor said. “We ask [ourselves the following]: Who is the customer? What problem are we solving? What are the most important benefits to the customer? What does the customer experience look like?” For Amazon, innovation is about high intentionality and requires planning out how any new offering will benefit the end-user’s experience.

The board should also ensure that management views emerging technologies as a means to achieving long-term value creation, rather than an end in itself. As noted by a director at the event who oversees a company in the healthcare and life sciences industry, companies cannot succeed sustainably if they don’t innovate alongside the customer. “When we talk about innovation, it’s the people whose lives we’re going to make better. We innovate around the patients,” she said. For her company, “It’s not just about [developing a different] drug delivery system or [a new] device, [but rather] how can we prevent unexpected events, and connect caregivers and care systems to the patient.”

Jeffrey Burgess, national managing partner of audit services at Grant Thornton, rounded out the conversation, pointing out that innovation should not only be limited to the board and management, but also be instilled at every level of the company. “I think [of] innovation [as] more and more on the front lines,” Burgess said.  “You need a culture [that] embraces change, and you need change management methodologies, procedures, and processes that drive innovation.” To meet these challenges, directors need to ensure that they are surrounded by intellectually curious and well-informed peers who can work with management to develop a forward-looking vision for the company. As Traylor cautioned, companies with boards that do not cultivate this curiosity may leave themselves vulnerable to the “ruthless and unsparing” effect of innovation.

In The War For Talent, The Best Offense Is A Good Defense

Career Partners International (CPI) is pleased to introduce our new employee engagement workshop, PowerMyWork™.  With decades of career management experience, CPI understands the value of an engaged workforce. The combined hard and soft costs from a disengaged workforce is an astounding $350 Billion annually, as reported by the Harvard Business Review. The war for talent is only getting worse, with USA Today reporting 73% of surveyed employees are open to opportunities at other organizations.  Employee engagement is a top priority for organizations looking to increase productivity and retain talent.

PowerMyWork™ demonstrates the powerful connection between highly engaged employees and business performance. This program enables participants to identify their strengths and how to leverage them to ensure a greater contribution to the organization. The insight gained ultimately leads to increased employee satisfaction and improved engagement – while maximizing organizational retention rates.

“Before this program, I had every intention of leaving the company. My career satisfaction was lower than it had ever been, and my stress level and frustration with my role was growing daily. It was only through the clarity and enlightenment I received from the program that realized I had the power to change my situation and stay with the company.” – Marketing Manager

More than ever, employers are looking for effective ways to improve the employee experience.  Focused on further developing an employee’s strengths, CPI’s PowerMyWork™ offers a unique program resulting in improved satisfaction and productivity.  PowerMyWork™ is a flexible, in-person workshop administered by our highly trained CPI Career Coaches who are committed to delivering a world-class experience in every session.

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As Bells Toll for Earnings Guidance, We Ponder Progress

Peter Gleason

There was a lot of buzz around NACD’s offices earlier this month as our people learned that momentum is building to end quarterly earnings forecasts. You can’t work at NACD for very long without learning that our members champion long-term value creation and oppose short-termism, or without coming to understand how earnings guidance destroys the former and promotes the latter. (Short-Termism 101: when companies estimate the next quarter’s earnings per share, they drive a 90-day focus on meeting that projection and discourage focus on the organization’s long-term vision.)

Our communal excitement stemmed from reports of an interview on CNBC’s Squawk Box featuring Berkshire Hathaway CEO and chair Warren Buffett and JPMorgan Chase CEO and Business Roundtable member Jamie Dimon. During the June 7 interview, the two iconic businessmen agreed that companies should stop providing quarterly earnings guidance. NACD’s researchers noticed the interview and hailed it as “great news.” They praised the Business Roundtable for its “leadership” and shared links to relevant research with me, like this study asking Does the Cessation of Quarterly Earnings Guidance Reduce Investors’ Short-Termism?, and this one on Moving Beyond Quarterly Guidance: A Relic of the Past from FCLTGlobal, the think tank for focusing capital on the long term.

Later that day, NACD put out a press release noting that while NACD had called for a move away from quarterly earnings guidance in the past, the problem was still lingering in 2017. The 2017–2018 NACD Public Company Survey found that nearly three-quarters (74%) of respondents said that focus on long-term strategic goals has been compromised by pressure to deliver short-term results. Frankly, the finding was discouraging, considering how many years we have all been working to reverse short-termism.

Perhaps a flashback is in order. Dimon and Buffett were not the first to advise ridding corporate America of short-term guidance, and the Squawk Box interview wasn’t even the first time they themselves had done so.

  • In June 2010, exactly eight years ago this month, NACD joined the Business Roundtable as some of the first subscribers to an Aspen Institute manifesto entitled Long-Term Value Creation: Guiding Principles for Corporations and Investors. One of the principles in that document was the recommendation that companies and investors should “avoid both the provision of, and response to, estimates of quarterly earnings and other overly short-term financial targets.” I was happy to sign on. Even prior to 2010 NACD had been making recommendations against short-termism in our Blue Ribbon Commission reports, our Key Agreed Principles, and other publications, especially those addressing executive compensation.
  • In October 2015 NACD issued the Report of the NACD Blue Ribbon Commission on the Board and Long-Term Value Creation, where we made a similar recommendation: “Boards should consider recommending a move away from quarterly earnings guidance in favor of broader guidance parameters tied to long-term performance and strategic objectives.”
  • In July 2016, both Dimon and Buffet themselves had signed onto a similar recommendation when developing Commonsense Corporate Governance Principles, which was published with backing from large institutions and companies across the investment chain. I spoke about the principles on C-Span the following month. The 2016 Principles stated that “companies should not feel obligated to provide earnings guidance—and should do so only if they believe that providing such guidance is beneficial to shareholders.” They further state that “making short-term decisions to beat guidance . . . is likely to be value destructive in the long run.”
  • In September 2016, I was a delegate at the General Counsel Summit on Short-Termism and Public Trust. The report from that event cited the 2016 Principles with respect to earnings guidance, as well as research from the Conference Board and others dating back more than a decade in questioning the wisdom of earnings guidance.

So looking back, the journey to end earnings guidance has been long. But that was then and this is now. Dimon today chairs the Business Roundtable (he was named chair in December 2016). And on the morning of June 7, the medium was an important part of the message: there were Dimon and Buffett, expressing their views in plain, spontaneous language, live, for all the world to see and hear in all their familiarity.

Progress

This entire history reminds me of a quote by Scottish author and government reformer Samuel Smiles, known for his treatise on self-improvement, Self-Help. He wrote: “Progress, however, of the best kind, is comparatively slow. Great results cannot be achieved at once; and we must be satisfied to advance in life as we walk, step by step.”

Thanks to many steps by many people over many years, the bell is tolling for earnings guidance at last. And that is indeed the best kind of progress.

What to Expect in Your CISO’s First 90-Day Board Report

Corey E. Thomas

Aligning with your company’s new chief information security officer (CISO) is a great opportunity to provide better protection for your organization, ensure regulatory compliance, and align previously siloed teams to gain clarity on how your business will respond in the event of a cybersecurity crisis. That’s why I urge board members to initiate early communication with those directly in charge of maintaining the enterprise’s vision for security by asking questions and collaborating on cybersecurity strategies.

According to a new study from the Enterprise Strategy Group and the Information Systems Security Association a lack of alignment between the security leader and the business can contribute to high CISO turnover. This is especially true if the CISO doesn’t feel welcome to participate in the boardroom meetings with executives.

This is a two-way street, of course. Board members often lack the knowledge they need to converse with information technology (IT) and cybersecurity professionals. They also tend to lack an understanding of how these groups contribute to effective enterprise risk management. Below we go through a few tips that will help put you on the right track and align these critical parties.

Understanding Your Company’s Risk Tolerance

First, in order for the board to understand the company’s cybersecurity posture, its members need to understand what level of risk is appropriate for your company. Each company’s individual strategy for growth, innovation, and safety should determine the extent to which it manages various types of risk, be it safety risks, operational risks, environmental risks, or technology risks (keeping in mind that technology plays a role in just about every category of risk).

Cybersecurity programs need to address an expansive and ever-changing threat landscape. They should include strategies to identify how vulnerable the organization is, determine whether or not they are compromised, and enhance operational efficiencies. During the first 90 days of his or her tenure, directors should be sure to get input from the new CISO on all of these areas, as well as a documented approach to how they will monitor the overall risk to the business based on these elements.

Setting Expectations

Understanding the risk tolerance of the business is the first step, but in order to properly determine this the CISO must be able to answer several questions. And knowing which questions to ask, and how these questions relate to managing risk within the company, will go a long way toward effective cyber risk management. To get a full understanding of your company’s cybersecurity posture, and ensure your security team is focused on the right things, ask your new CISO to answer the following questions in his or her first 90-day board report.

  1. Does our security team have a full, well-informed view of our organization’s vulnerabilities? What are our top three cyber threats? How do we identify and deal with emerging threats?
  2. What have we learned from past cybersecurity incidents?
  3. Does management have a clear vision of the cyber risks to our organization? Can you provide any past examples of C-suite executives supporting the cybersecurity objectives of the company?
  4. Are we managing cyber risks in alignment with the appropriate level of risk for our company and industry?
  5. What steps are we taking to ensure compliance with all requirements for our industry? Do we follow any cybersecurity industry best practices such as the Center for Internet Security’s Critical Controls?
  6. What is our cybersecurity incident response plan? Do we maintain an internal and external communications plan as a component of that? Has a tabletop exercise been completed to test the effectiveness of the plan?
  7. How is our security team collaborating with our IT and development operations teams? Look for examples of a strong security operations (SecOps) practice, such as shared data and integrated processes, helping to make security inherent within all business operations and innovation.
  8. How are we ensuring that our partners take appropriate security measures? For example, when engaging outside firms for services, are those other companies protecting sensitive information such as our marketing strategies and customer information? How is this being enforced? This could include signing agreements and performing regular assessments of vendor security practices.
  9. How do you measure the effectiveness of our cybersecurity program and initiatives?
  10. What investments can we make to further reduce our risk? What do we need  and why?

Encourage your board as they review the information provided by the CISO to ask for relevant specific examples and documentation. While your fellow board members might not know the underpinnings of cybersecurity, they will have a fresh point of view around the resources and implementation of these processes. For instance, a comprehensive incident response plan should be thoroughly documented and readable for all involved parties so that they are aware of their role during a security incident.

By asking the CISO these probing questions, verifying the responses, having a knowledgeable senior executive or board member sponsors, and partnering with a trusted cybersecurity advisor, your organization will have a defined understanding of its cyber risks and will be prepared to make informed investment decisions.

Next Steps

Only 44 percent of cybersecurity professionals surveyed by the Enterprise Strategy Group and the Information Systems Security Association believe that CISO participation with executive management and boards of directors is at the right level. Clearly, more needs to be done to inform risk-based cybersecurity decision making as well as deeper integration of SecOps into core IT and development responsibilities. How can you buck that trend?

After the 90-day report from the CISO is a perfect time to discuss the answers to these questions. Follow up with your CISO to identify areas of concern and where more support from the board or executives might be needed for them to succeed. An ongoing dialog is critical, and will fine-tune cyber-risk management. It will also allow management to make informed technology investments, identify what training needs to happen, and provide ongoing cybersecurity governance aligned to risk tolerance and business goals.

The time is now for boards to improve the quality of dialogue with CISOs. Initial conversations and expectation-setting will minimize the possibility of overlooking cyber risk that could be detrimental to the corporation and its shareholders, while also making sure that everyone involved in the oversight of security gets on the same page.

 

Corey E. Thomas is CEO of Rapid7. Read more of his insights here.

CPI Renews Retirement Options’ Accreditation with International Coach Federation

Career Partners International (CPI) is pleased to announce that, for the sixth consecutive year, our Retirement Options Webinar Certification program has been accredited by the International Coach Federation (ICF) for 36 hours of Continued Coaching Education credits. As the world’s largest organization of professionally trained coaches ICF is committed to connecting member coaches with the tools and resources they need to succeed in their careers.

Founded in 1989, Retirement Options is CPI’s “retirement readiness” branch of services. Utilizing two world-class assessments, the Retirement Success Profile™ and the LifeOptions Profile™, Certified Coaches are equipped with the tools, training and support to effectively coach the largest demographic in the world, Baby Boomers. Thousands of individuals, couples, and employees of corporate clients have participated in the Retirement Options program to develop the building blocks for more successful retirement plans! With a directory of over 850 Certified Coaches around the world, Retirement Options helps individuals connect with local ICF Certified Coaches to better plan for the future.

“Working with Retirement Options helped me grow my coaching practice,” said Certified Coach, Bob Coulson. “The assessments are great tools that helped my clients identify gaps in their retirement preparation and helped me structure my coaching for the greatest impact.”

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Building Board Climate Competence to Drive Corporate Climate Performance

Veena Ramani

Investors are on to a definite theme these days—and Kinder Morgan and Anadarko Petroleum Corp. are the latest companies to experience it.

Earlier this month, investors in the energy infrastructure giant backed shareholder resolutions calling for more transparency and reporting on how Kinder Morgan is addressing the impacts of climate change and mitigating the risks. A similar resolution at Anadarko also received a majority vote this month.

This is a trend that has picked up steam during recent proxy seasons, with shareholders just last year voting in favor of climate change resolutions at major firms, including Exxon Mobil Corp., PPL Corp., and Occidental Petroleum Corp.

As I wrote in a recent NACD blog, one consequence of this growing focus on climate risks is that investors, led by major money managers such as BlackRock and State Street, are increasingly emphasizing the role of corporate boards in driving company responses.

And now Systems Rule, a new report from Ceres, shows that investors are right to push for strong governance systems for sustainability.

Our analysis of board governance practices and performance data of large global companies found that businesses that integrate sustainability priorities such as climate change into board mandates, director expertise, and executive compensation also demonstrate strong performance on sustainability issues.

The report provides important insights for boards to pay attention to as they consider how to oversee climate-change-related risks and strategy.

But here’s the issue: Most large companies aren’t among these performers because they still have fragmented systems of board governance, especially when it comes to sustainability oversight.

This is partially true because many directors and company leaders still do not understand the material impacts associated with environmental and social issues, like climate change. In fact, Systems Rule noted that only 17 percent of corporate directors have demonstrated expertise in sustainability issues.

For companies to get moving and establish governance systems that can deliver commitments and performance on climate change, the whole board needs to start by establishing some baseline fluency that will help them understand when these issues could in fact be material.

That’s where a new Ceres primer, Getting Climate Smart, can help.

Developed specifically to increase board fluency in climate change, the report provides an overview of the different ways that climate change can impact an enterprise and how boards can integrate climate change oversight into their responsibilities in the boardroom.

It’s designed to be a valuable tool for corporate directors who want to educate themselves on what this issue means to their business and what they can do about it.

So how practically can directors build climate competency into their board?

  • Formally include oversight of climate-change-related issues in the board structure. Formalizing climate change’s importance to business by including it in board committees’ mandates ensures the topic is regularly discussed. Citigroup, Ford Motor Co., and Nike are just a few of the companies that do this.
  • Recruit climate-competent directors. Committees should cast a wide net through the nominating process so they can consider candidates with diverse backgrounds and expertise in addressing climate change.
  • Integrate climate change into strategic planning and risk oversight. Directors should ensure that management takes the business impacts of climate change into account at every level of the company. Businesses including BHP Billiton and Shell conduct scenario analyses to assess the impacts of climate change on their portfolio of assets and business policies.
  • Tie executive compensation to actions that mitigate climate change. To encourage action, executive compensation can be tied to a company’s progress on addressing and opportunities, such as cutting greenhouse gas emissions. Xcel Energy links 30 percent of its executive compensation to carbon emission reduction goals.
  • Promote climate change disclosure. Without robust disclosure, investors cannot accurately analyze how a company is responding to climate change. Companies including Aviva, Unilever, and Zurich Insurance committed to updating their disclosures based on new Task Force on Climate-related Financial Disclosure (TCFD) guidelines.

The takeaway from our research is clear. It pays for companies and boards to adopt strong board oversight systems for climate change. But as a first step, boards should first develop climate fluency to understand the material risks their company may face. Fluency with the issues and strong, holistic governance systems will lead to the performance impacts that investors and other stakeholders want to see.

Veena Ramani is program director of capital market systems programs at Ceres.