Rob Goudswaard FAICD is the chair of the advisory board for Revolut Australia, chair of the board of Cornerstone Healthcare Property Fund, and mentors a variety of CEOs. In this article, Rob weighs up how different Australian businesses are approaching the most pressing risks in the corporate landscape today.
Exploring risk in Australia’s corporate landscape
With forty years’ experience in banking and five as a director, many financial services organisations have asked me to go in and review their business operations. My frame of reference is my background in economics, with a deep understanding of corporate governance and risk.
Almost without exception, the board has called on me because they are dissatisfied with an operational matter. They may feel that something is not moving as quickly as they would like it to, or they wonder whether the organisation will still be around in five years’ time if it keeps doing more of the same. I look for inefficiencies and ways to sharpen up processes.
When I report back, I will highlight aspects of the business that need to change. Or it may be that everything is being done correctly – and if that’s the case, the board will be happy to hear it because they now have what you might call ‘independent validation’.
A lot on the line
Most board members know how critical it is for them to fulfil their director duties by meeting compliance requirements. Under Australian law, a director can now be held personally liable in some circumstances for the company’s debts and regulatory action can be taken against them. It is incredibly important to manage risk.
The most common types of risk are operating risk and compliance risk, along with market risk and geopolitical risk. Frankly, you can spend your whole life thinking about all the different types of risks. In my experience, there is a spectrum of approaches to risk. Sometimes the concept of risk is too complex or abstract for a director; it seems completely theoretical and therefore a bit ho-hum. Or it may seem like there is no solution. Take cyber risks, for example. It is impossible to ever completely eliminate the risk of a data breach, no matter how much time and money is invested into guarding against it. But you can’t just throw your hands up in the air, of course. It can be helpful to determine your cybersecurity maturity levels to see where your organization stands in comparison with others.
“Everyone is talking about it (ESG), and there are really diverse approaches to it”
A topical risk right now is Environmental, Social and Governance (ESG). Everyone is talking about it, and there are really diverse approaches to it. Some companies have dedicated a huge number of personnel to focus on it and have developed all these beautiful processes. The question is whether it is slowing down the rest of the business. At the other end of the spectrum is when the leadership team of a company is like, ‘Sorry? What is ESG?’
Tailor the response to risk
I believe it is important to develop a risk management framework that is appropriate for your specific business. The type of risks most relevant to a bank may be quite different from a startup. Every organization has a different risk appetite as well.
“I believe it is important to develop a risk management framework that is appropriate for your specific business”
From an HR point of view, the biggest risks are occupational health and safety, including workplace culture and bullying. For example, if a business has a turnover rate of 20% (which is the equivalent of one in five employees leaving every year), a board must consider why they’re leaving. Is there bullying? Perhaps high turnover rates are normal for the industry, such as at call centres, where people typically only work for a few months.
However, if the business usually has a 10% turnover rate and it suddenly jumps to 20%, you need to ask some questions about what’s going on. Is the business still looking after its people correctly, or is there something that’s changed in the environment that is causing people to leave? Perhaps there is a new strategy in place, which means that a lot of new people are coming in, in which case you might expect to have a higher than average number of people leaving.
A fruitful relationship
I’ve had a close association with Quinn Allan for many years, and in particular with its managing partner and founder James Hyndmann and partner Gavin McDonald. When I first became a non-executive director and I was considering different board roles, I had an existing network that was wonderful, but I didn’t know many other directors. Quinn Allan were really helpful during that time. I would have a conversation with James or Gavin, and they would introduce me to someone I didn’t know or wouldn’t have thought of, and then connect us. They have also been a valuable sounding board when I’ve been mulling industry-specific issues.
“With Quinn Allan, they see the person and they remember that person for a long time… you will hear from them again down the track”
I have also found that they value long-term professional relationships. Often you only hear from recruiters if they have a job to fill. With Quinn Allan, they see the person and they remember that person for a long time. There may not be an exact fit at that moment, but you will hear from them again down the track. James and Gavin are both approachable, responsive and provide consistently excellent service.
