3 Simple Steps To Handle Social Risk

Boards have been aware that social media can damage shareholder wealth since ‘United Breaks Guitars’.

AMP and Cleanaway are under scrutiny after revelations about CEO behaviour. Seven West Media, IFM Investors, QBE (twice), AFL, David Jones, Cricket Australia, and many others preceded these disasters.

So, what can boards do to prevent or mitigate this risk?

Here are 3 suggestions from the Stanford Corporate Governance Research Institute:

1 — Use knowledge of the past to inform future plans. There are enough past examples to study and evaluate what works in the Australian context and what doesn’t.

2 — Conduct scenario planning to identify high likelihood events. There is no room in the boardroom for a director who doesn’t know the business and its culture, and the risks inherent in how you choose to operate.

3 — Prepare responses and identify the resources necessary to prevent or mitigate risks. Once you know what has happened elsewhere and how it has best been handled, and what could happen to your business and how it would impact your value, then you can plan to prevent and mitigate.

Band-Aids don’t fix bullet wounds. Dodging the bullets, or quick access to emergency surgery, is a better strategy.

Is your board social disaster ready?

Julie Garland McLellan is a consultant who works with boards and directors to give them the practical skills they need to build better businesses.

She is famous for her practical and pragmatic approach to the real problems that face boards and directors and for her ability to bring sanity and solutions to even the most vexed boardroom.

She has first-hand experience on 18 boards across three continents — including listed, private, government, and not-for-profit boards — and has helped boards to lead successful organisations for over 22 years. Julie has written and facilitated director education for leading governance institutions, including the Australian Institute of Company Directors, The Governance Institute of Australia, The National Association of Corporate Directors (USA), The Taiwan Corporate Governance Association, etc.

Julie is the author of six books for directors and is publisher of The Director’s Dilemma newsletter.