Interview with Mark Buzan, Founder and Executive Director – Society of NonProfit Board Directors

Ahead of the NonProfit Board On-line Summit 26-28 February 2021 I​ talked with Mark Buzan, APR-CAE, Founder and Executive Director – Society of NonProfit Board Directors about what attendees can expect from the day. https://www.nonprofitboardsummit.org/

ESG Investing: The 5 Biggest Questions

By Refinitiv -March 6, 2020

  1. Our LinkedIn audience answered five questions on the current state of ESG investing, including how to manage gaps in the disclosure of ESG data.
  2. The LinkedIn chat questioned whether asset managers were actively pricing climate change risks into their investment decisions and portfolios.
  3. The discussion concluded that ESG compliance was now a vital consideration for any organization looking to progress and grow in the coming decade and beyond.

Financial professionals are increasingly differentiating their services using environmental, social and governance (ESG) criteria.

But how is it possible to show sustainable leadership when the screening of corporate performance involves so many different data points, ranging from emission levels through to diversity, business ethics and corporate governance?

Over the course of five days, our recent LinkedIn discussion examined the current state of ESG investing with the help of our 96,000 followers and several members of the #RefinitivSocial100 group of social influencers.

We asked five questions during the week, including on the challenges of ESG data and reporting, the pricing of climate risks in investment decision-making, and the benchmarks required for robust ESG investing.

Those involved included David Doughty, corporate governance expert; John McLean, Managing Director at ACRe Data, a provider of alt data for the U.S. Municipal market; Will Rowlands-Rees, a specialist in qualitative and actionable insight for sell-side, buy-side, and corporates; James d’Ath, founder of Sustainix, a research services business with expertise in sustainable investment; and Debra Ruh, founder of a strategic consulting firm specializing in disability inclusion.

From Refinitiv, we heard from Hugh Smith, ESG, Investment Management, Americas; Franita Neuville, Investment & Advisory Performance Director, MEA; Leon Saunders Calvert, Head of Sustainable Investing & Fund Ratings; Elena Philipova, Global Head of ESG Proposition; and Luke Manning, Global Head of Sustainability and Enterprise Risk.

Thank you to all those who contributed to the #SustainableLeadership discussion — and remember, it’s not too late to keep the conversation going.

See which social influencers are on the #RefinitivSocial100

Q1: ESG data issues: How do investors manage data gaps?

David Doughty set the tone for this discussion with his ‘no-nonsense’ reply: He said:

Ideally, by not investing in companies where insufficient ESG data is available — in practice, by not guessing or taking a gamble.

This sentiment was echoed by Leon Saunders Calvert, who expanded on this mentality:

If ESG is to be treated as investment-grade, fundamental data, which is material to investment allocation decisions, then non-disclosure of material data points should cause skepticism as to whether to invest.

You wouldn’t invest in companies that didn’t report their core financial data. So, if you are a ‘values’-based investor you cannot very well invest in companies which don’t detail material information.

While this hard-line approach to data gaps was prevalent, there were some who saw positive possibilities, as Elena Philipova explains:

ESG data gaps present challenges, but more importantly, create opportunities for investors — to sustain financial stability and grow, to differentiate and innovate, and to better serve the changing needs of the customers.

The industry is booming with innovation, and ESG is arguably one of the most exciting and critical areas to be in for the foreseeable future.

David Doughty quote. ESG Investing: The 5 biggest questions.

Q2: What can you do to encourage your investment options to report on their ESG performance?

On encouraging investment options to provide greater clarity through ESG reporting, most participants agreed that reinforcing the modern relevance and importance of ESG compliance was the first step towards promoting positive change. Luke Manning summarized:

Businesses can no longer afford to ignore environmental and social considerations, or not communicate about them. The simple truth is the world will be powered, resourced and fed in a different way in the future. Businesses will have to adapt, and will have to be very transparent in the process.

But does the responsibility for this lie beyond investors? John McLean explained why he sees this job as a group endeavor:

The focus cannot be primarily on corporations. Governments large and many small, may not have the resources, know-how, or incentive to self-report on ESG facets. ESG is undoubtedly here to stay, and is the new focus for investing, but we investors/alt data vendors may have to continue to do much of the reporting for the non-corporate world.

Franita Neuville. ESG Investing: The 5 biggest questions

Q3: Is an ESG view of a company vital for an accurate long-term view?

Support for ESG analysis as standard for businesses was unanimous, with many including Will Rowlands-Rees viewing it as an essential means of monitoring and regulating an organization’s decision-making processes:

Besides the obvious lens on outcomes, what ESG analysis does for the first time is allow outside investors a view on the quality of decision making in the organization on their strategy vs. just a view on the outcomes, which is what traditional 10K/Q and equivalent analysis provides. It’s a great proxy to understand if a company has fully thought through the potential outcomes of a strategy.

Hugh Smith. ESG Investing: The 5 biggest questions

What is it that makes ESG such an integral part of any long-term business operation? Elena Philipova shared her view:

ESG data represents the long-term health of businesses, while financials paint the short-term skeleton of companies. Both data sets are fundamentally important to valuate correctly the investment options, for capital preservation, and impactful capital allocation, which will deliver sustainable economic and social growth.

Following on from this, an important point was raised:

I think the important question here is: Do investors have the information and tools required to objectively assess, at scale, the ESG profiles and thus the long-term health of their investment options and portfolios?

With a strong consensus in favor of normalizing businesses’ relationship with ESG, it would appear that understanding is already prevalent; the biggest challenge could be putting this shift of mindset into practice.

Q4: How are asset managers pricing climate risks into their investment decisions and portfolios?

Everybody talks about the weather, but nobody does anything about it.

James d’Ath used Mark Twain’s musings to begin his observations on the relationship between asset managers and climate risks:

Everybody is talking about it, less though are actively engaging. However, change is coming. How managers seek to engage will ultimately depend on their ability to understand the full impact of climate change across their portfolios. Risk, after all, varies inversely with knowledge.

This time around, there seemed to be a more prevailing agreement that acceptance and action in this area were lagging, as Debra Ruh summed up:

Some investors are stepping up with impact investing, but most are still not engaged in these conversations in a meaningful way.

However, she suggests this mindset can be changed, adding:

I believe investors, funders, philanthropists, can all add value to the social impact and green conversations. It is also critical for impact investors to understand the UN SDGs and engage in Climate Action activities.

James D'Ath. ESG Investing: The 5 biggest questions

Whether this conversation is being actively driven or not, John McLean explained why he believes the issue will soon be impossible to ignore:

To answer the question — no — climate change is not yet priced into portfolios and investment decisionsBut it will be soon, and those left last to understand the valuation risk, will be left holding an asset that is priced at a much wider spread or lower valuation, with many questions to be answered by devastated stakeholders.

Q5: What standards are investors benchmarking against? And what ESG regulation is coming?

Our final question looked at regulation and measurement of ESG — both now and looking forward. Participants concurred that more regulation was on the horizon, but current benchmarks are lacking at best — and absent at worst.

John McLean led with his first-hand benchmarking experience:

Current benchmarks for ESG — at least in municipals bonds — are absent and, if present at all, are in-house designed with no street standards. What regulation is forthcoming  will be most likely very little.

IOSCO standards for benchmarking will have the indices that utilize ESG, ensuring that transparency and robustness exist. Beyond that, unless there is an industry standard created among vendors, it will be difficult for clients to compare one ESG provider to the next.

David Doughty quote 2. ESG Investing: The 5 biggest quotes

David Doughty echoed the opinion that there is still some way to go to bring measurement standards up-to-scratch:

The UK Corporate Governance Code provides some measures in terms of the G of ESG for governance, and is making some moves towards the S for social measures, such as corporate culture, diversity, and gender and ethnic pay-gap reporting. More needs to be done, especially on the E for environmental impact measures.

If current standards and guidance for ESG measurement are lacking, where should benchmarking begin? Hugh Smith shared his thoughts:

A simple place to start would be whatever index you benchmark your performance to. If you are a U.S. large cap equity manager striving to outperform the S&P500 in terms of return, you can also compare your performance in terms of things like emissions intensity, diversity at different levels of seniority, board independence etc., and strive to outperform the benchmark on these metrics, too.

Disclosing relative performance against these metrics to clients also helps investors understand what effect or impact ESG integration is really having.

ESG investing: What did we learn?

The message shared from everybody who participated in our LinkedIn discussion throughout the week was clear — change is already here. ESG compliance and transparency is now a vital consideration for any organization looking to progress and grow throughout the coming decade and beyond.

As we move into the 2020s, investors are putting far greater stock in the ethical, sustainable nature of business, which can only be a good thing.

Read the Refinitiv report — ESG Investing: the good, the bad, and the future

David Doughty – FinTech RegTech 2020-07-02

Interview first published in Journey of the Idea 02-07-2020

Can you summarise your experience in the FinTech and RegTech sectors?

I spent most of my life doing I.T and enterprise software development. I exited my last company in 2007, which I’d co-founded. For the last ten years, I’ve been focussing on corporate governance. I’ve been working with boards of directors of all sorts of companies, in all sorts of sectors. Looking particularly at governance in the FinTech, RegTech, Banking and Financial Services sectors.  

What do you think are the biggest unsolved problems and issues in the FinTech sector?

There’s a lot of talk about Artificial Intelligence. Most applications at the moment are just scratching the surface of AI. So, I think there’s a lot of companies out there looking for people who are AI experts. And a lot of the work they’re doing is quite low level. The opportunity for people in AI is fintech startups. The smaller, more agile companies who can harness that stuff much better than the larger organisations.  Obviously, things like blockchain, to make things more secure. There’s the whole area of cybersecurity and how you protect these things, especially if they’re going to move into mobile devices, wearables and all the other ways in which we’re going to start accessing financial information. Cyber-security becomes a much bigger deal, as people have found out just with Bank employees working from home. The security implications are massive.  I think there is an added focus on customer experience. So UI design, how customers will access information from various devices, how we’re going to monitor transactions and make life easier for customers. Banks have had it far too easy. The Challenger banks are offering a much better customer experience. 

What has taken you by surprise about the way the sector has developed over the last ten years?

Only that it’s taken them so long! The technology has been around forever. If you look at social media platforms – Facebook, Google, Twitter – they’re all ten years old, if not more. So the technology has been around for a while. The big surprise for me is that it has taken so long for it to hit financial services. They’ve got a lot of catching up to do. One of the areas I didn’t mention before is the use of big data. Imagine if you could see all of the financial transactions going on in the world at one time, which is technically feasible, and you could analyse that, then things like money laundering and financial crime would be quite difficult to hide. You’d be able to spot the unusual transactions. Having worked with banks in the past, I know how antiquated their systems are. They’re still working on old legacy systems.   

Do you think a lot of the innovation in future will be happening inside these big banks as they catch up? Or do you think there is still room for startups to change the game?

I think a lot of the innovation will come from startups, but they will be rapidly bought out by the big organisations, who just haven’t got the resources to do it all themselves. There will be a lot of consolidation once the innovations start.  

Is there anything that current startups in the sector are missing?

As soon as they start competing with banks, for example, startup banks, they will encounter a lot of competition from the people already entrenched in the system. They either get forced out or they get bought up. I think it’s going to be very difficult, in an end to end service like starting your own challenger bank, to be successful and growing to the same size. It’s the race for getting customers which costs a lot of money. You don’t make any money to start with, because you’re trying to get your customer base up. I think what will be a growth area is the intermediaries, people who handle parts of the system.  

Any thoughts on the RegTech sector?

RegTech goes hand in hand with FinTech, applying the same sort of technology to the regulations that all the banks and insurance companies have to operate within. Most of the major banks, at least 50% of their technology effort is on trying to comply with regulations. And the regulations just get bigger and bigger. The Anti Money Laundering and Know Your Customer, are big ones. If you’re trying to make it easy for people to set up an account, then you’ve got to do those checks very quickly and easily. Another thing is all of the sanctions, particularly the sanctions America puts on countries all over the place, that you have to comply with. Keeping track of all those regulations is a big area. There’s quite a lot of work going on in RegTech to try and make it easier for Banks to comply with the regulations. 

Equality, Diversity & Inclusion in the Charity Boardroom

The recently updated Charity Governance Code includes clearer recommended practice in the renamed Equality, Diversity and Inclusion (EDI) Principle and sets out four stages of practice for charities in their EDI journey.

Boards should:

  1. Think about why equality, diversity and inclusion are important for the charity and assess the current level of understanding.
  2. Set out plans and targets tailored to the charity and its starting point.
  3. Monitor and measure how well the charity is doing.
  4. Be transparent and publish the charity’s progress.

So, how can charity trustees and in particular their Chairs tackle the four stages as a priority for 2021?

As a Chair of a registered charity and having worked with the boards of many charities on matters of Corporate Governance, I would like to suggest the following practical approaches that can be taken to help trustees on their journey to satisfy the four stages towards EDI compliance:

1.   Think about why equality, diversity & inclusion are important for the charity and assess the current level of understanding.

EDI should not be seen as a box-ticking exercise or an attempt to address historical racial injustices – from the point of view of a charity trustee, it should be focused on asking the questions:

  • how can we ensure that we are recruiting the best trustees, staff and volunteers?
  • how can we best understand and meet the needs of the communities our trustee has been set up to serve?
  • how can the board ‘set the tone from the top’ to ensure that the charity treats all its stakeholders with respect, equally and fairly in order that it can do the greatest amount of good in achieving its charitable objects?

In order to measure progress along the EDI journey, it is important to understand where the charity is now in terms of its current level of understanding of the issues involved and the barriers that may prevent equality, diversity and inclusion in the organisation.

This will involve discussion amongst the trustees and between the board and senior management and with staff and volunteers and may require training and facilitation, either internal or external, in order to produce a clear picture of where the charity is now in terms of EDI.

It is important at this stage to formulate a collective idea of ‘what good looks like’ and to manage the expectations of your key stakeholders.

Wherever you are starting your EDI journey it will involve change – increasing diversity means increasing difference and the board must recognise that if it is bringing potentially different people onto the board then it may well need to behave differently itself.

This requires a degree of self-awareness and possibly changes in terms of style and presentation to ensure that the board is truly inclusive. The whole point is to recruit trustees who will bring new ways of supporting and challenging the executives and fellow board members – this should be anticipated and welcomed by all the current trustees.

2.   Set out plans and targets tailored to the charity and its starting point.

A good place to start is the charity’s Articles of Association, or other constitutional document. It is good practice to review them regularly, say every 5 years, anyway but particularly when there is a change in the law or Corporate Governance Code.

By law, trustees must be appointed for a fixed period of time and your Articles will say how often trustees should be presented for re-election at the annual general meeting – typically one third of the board will resign each year and trustees will either seek re-election or new trustees will need to be recruited.

It is good practice to appoint trustees for an initial term of 3 years and they may then serve a total of 6 or 9 years on the board.

If you are thinking of refreshing the board to make the membership more diverse, then it is a useful starting point to know when your current trustees are due to retire – though stepping down from the board is not necessarily the end of a trustees’ involvement with the charity, there is still an opportunity to play an important role as an Advisory Board member, or, with particular importance to EDI, as a mentor to new trustees.

The next thing to look at is the skills of the current trustees to see if there are any gaps. Typically, charity trustees were recruited with a legal or accountancy background but these days, charities also need digital marketing, information governance and cyber-security expertise in order to be able to effectively challenge the executives.

Finally, it is a good idea to examine your recruitment adverts, your website content, particularly on the charity’s governance and where you are advertising for new trustees.

Often the language used in trustee vacancy adverts tends to be off-putting for various sectors of the community from which you are looking to recruit – think about any unconscious bias which may be present which may deter applications from anyone who is not comfortable with the language you are using in the text.

It is a good idea to try out the content with members of the communities that you are targeting and seek their opinion on the best ways to reach the intended audience.

One of the most common hurdles which must be overcome is the apparent lack of suitable candidates for new trustee appointments.

The 2017 research report, Taken on Trust, published by the Charity Commission found that

92% of trustees were white, 51% were retired, 75% were richer than average, and 60% had a professional qualification

– so adverts asking for previous trustee experience are unlikely to receive applications other than from the demographic highlighted in the report.

In order to search a wider pool of potential trustee talent, boards need to consider appointing associate trustees who can then ‘learn on the job’ – with the help and support of mentors who may will be the trustees that the new recruits are replacing.

Programs such as those run by Board Apprentice and the NHS NExT director scheme are a great way to expand the talent pool of diverse candidates for board positions.

By the end of this stage you should have a timeline and a clear set of actions. When it comes to setting targets, these should be set with regard to improvements in the board’s effectiveness and the charity’s performance and not numeric or percentage targets based on protected characteristics.

3.   Monitor and measure how well the charity is doing.

Organisational change is always difficult, particularly for a charity board of volunteer trustees – there will be some trustees who wholeheartedly embrace change, some who are indifferent and some who actively oppose change.

Difficult conversations will have to be had, especially when it comes to boardroom behaviours and there may have to be an early parting of the ways for trustees who are unwilling or unable to come to terms with the challenge.

Having engaged and involved stakeholders at the start of the journey it is important to keep them informed of progress at regular intervals. A board EDI program may also be run in parallel with one for the rest of the organisation and learning opportunities should be encouraged between the two.

Key to the success of an EDI program is building and maintain relationships with the communities from which you are looking to attract new trustees. There are a great many organisations, often charities themselves, who will welcome the opportunity to help you to make your board and charity more inclusive – they may also have a lack of diversity on their own boards so their may be an opportunity for reciprocal support.

The main message is: ‘don’t be afraid to ask’.

4.   Be transparent and publish the charity’s progress.

The opposite of a diverse and inclusive board is a secretive, exclusive mono-culture, of which, unfortunately, many examples can still be found. Transparency is key to ensuring that the EDI journey is seen as a genuine desire to improve the effectiveness of the board and the performance of the charity by engaging with and recruiting trustees from as wide a talent pool as possible.

Making good progress and being able to talk about the journey openly can be a source of competitive difference when it comes to winning scarce grant funding.

It is a virtuous cycle – getting the best people on board and as staff and volunteers, regardless of gender, ethnicity, disability or sexual orientation makes for a better charity which then enables it to meet the needs of the community it serves more effectively, which leads to enhanced reputation and funding.

No alt text provided for this image

2020 Charity Governance Code recommendations on Equality, Diversity & Inclusion, and Integrity

The recently updated Charity Governance Code, which sets out 7 principles of good governance practice for charities in England and Wales, includes clearer recommended practice in the renamed Equality, Diversity and Inclusion (EDI) Principle, and updates to the Integrity Principle to emphasise ethics and the right of everyone who has contact with the charity to be safe.

The 2020 update to the Code follows a rigorous consultation with the charity sector that involved user focus groups and received over 800 responses. With feedback particularly focused on the diversity and integrity principles, the Code’s Steering Group commissioned specialist EDI consultants to carry out further research and advice.

Rosie Chapman, Chair of the Charity Governance Code Steering Group said:

These improvements to the Charity Governance Code reflect changes in society and the broader context in which charities are working.

The updated Code is designed to help charities adopt good practice and secure better outcomes for the communities they serve.

We know that charities are at varying stages in their efforts to fully adopt the Code, including in achieving equality of opportunity, diversity and inclusion, and the updated Code is designed to help charities on this journey.

We’ve also heard that charities and boards would like more guidance on how to improve their approach to EDI. In response, we are asking charity umbrella and infrastructure bodies to provide more guidance and support to charities, to help them meet the recommended practice in the Code.

The Code recommends four stages of practice for charities in their EDI journey. Boards should:

  1. Think about why equality, diversity and inclusion is important for the charity and assess the current level of understanding.
  2. Set out plans and targets tailored to the charity and its starting point. 
  3. Monitor and measure how well the charity is doing.
  4. Be transparent and publish the charity’s progress.

Pari Dhillon, independent EDI consultant who advised the Steering Group on the changes, said:

As a governance and EDI fan, I’m very excited about the launch of the Equality, Diversity and Inclusion principle, for two reasons.

Firstly, great EDI has the power to create social justice in our boardrooms, charities, sector and ultimately society.

Secondly EDI practice sits at the heart of good governance, and I’d argue you can’t have one without the other. I say this because:

– To maximise public benefit, boards must focus on achieving equality of outcomes through their charitable purpose.

– To make better and more informed decisions, boards must be diverse, reflecting and centring the voices of the community and needs that the charity seeks to serve.

– To make robust decisions, all board members must have the power to fully participate and societal power imbalances must be prevented from playing out in an inclusive board room.

Malcolm John, Action for Trustee Racial Diversity commented on the new EDI Principle:

I’m delighted that the updated EDI Principle picks up the mantra of Actions not Words by encouraging charities to focus firmly on agreeing plans, setting targets and monitoring their progress.

I’m hopeful that this will help set charities on the path to achieving greater racial diversity at all levels by moving away from informal recruitment processes for trustees and committing time and resources to drawing from a wider and more diverse pool of people.

As part of the Code’s refresh, the Integrity Principle has also been strengthened to emphasise the importance of a charity’s values, ethical decision making and the culture this creates.

Rosie Chapman, Chair of the Steering Group explains:

We’ve also updated the integrity principle to reflect the importance of everyone who comes into contact with a charity being treated with dignity and respect and to feel that they are in a safe and supportive environment.

In particular, the Code includes new recommended practice on the right to be safe (safeguarding) that asks trustees to:

– Understand their safeguarding responsibilities.

– Establish appropriate procedures that are integrated with the charity’s risk management approach.

– Ensure that everyone in contact with the charity knows how to speak up and raise concerns.

Charities are encouraged to visit the Code’s website to view and download the new edition of the Code. Explanatory videos and accompanying blogs can also be found on the website.

As any experienced business executive who joins a Charity Board as a Trustee knows, running a charity, especially in 2020, is a particularly challenging task. Charity Chief Executives should be able to draw on the widest range of skills, background and experience from their Trustees for support. EDI should not be seen as pandering to sentiment but as an essential requirement to ensure that Boards have the best people contributing to the governance of the Charity, regardless of gender, race, ethnicity or class.

Charity Trustees are, by and large, enthusiastic, unpaid, supporters of the cause that their charity serves but they should also ensure that they understand their role, duties and responsibilities – the updated Charity Governance Code is essential reading for all charity Trustees.

Practical steps to improve board diversity

NHS NExT Director scheme – supporting tomorrow’s Non-Executives

Many boards in the private, public and voluntary sectors realise that they need to improve the diversity of their board members, whether it be ethnic, gender, restricted ability, age or socio-economic background, but find it hard to know where to start.

An example of a practical solution to the problem of finding suitable board candidates from diverse backgrounds is the NHS NExT Director scheme – a programme that matches people who want to be NHS non-executives, but might not necessarily have the right experience, with trusts who are looking for a more diverse make-up of their boards, so that they can learn first-hand about the challenges and opportunities associated with being a non-executive director in the NHS.

The opportunity

There is emphatic evidence that diverse boards make the best decision (and conversely, many examples of corporate failures where the boards have been drawn from a narrow range of backgrounds and experiences) – to help the Chairs and directors of NHS trust boards build more diverse, better performing boards, the NHS have identified the need to take positive action to increase the diversity of the talent pool of people who want be NHS non-executives.

The NExT Director Scheme is a development programme created and designed to help find and support the next generation of talented people, from groups who are currently under-represented on NHS boards, to become non-executive directors.

It focuses particularly on supporting people from local BAME communities and disabled people with senior level experience into board level roles in the NHS. People with other protected characteristics are also considered for placements.

The NExT Director programme follows a number of successful pilot schemes such as the Diversity Advantage Programme which ran in the South West of England in 2016. Chartered Director, Julia Clarke, CEO of Bristol Community Health CIC and Non-Executive Director Poku Osei were joint winners of the NHS SW Leadership Academy’s Inclusive Leader Award, which demonstrated the success of the practical steps taken to train and place NEDs from BAME backgrounds onto NHS boards.

The NHS undertook a board diversity survey in 2017 and established a baseline set of figures for NHS provider board diversity which highlighted the work needed to achieve the ‘50:50 by 2020’ target for gender balanced boards, the significant gaps in BAME representation in comparison to local populations and workforce, and the lack of representation of those declaring a disability.

Placements

The 12-month programme gives successful candidates a unique insight into the role and responsibilities of being an NHS non-executive director by supporting senior people in bridging knowledge gaps, for example by helping them with:

  • Operating at board level
  • Transitioning from executive to non-executive roles
  • Board level exposure in an organisation of huge size and complexity
  • Understanding NHS structures and accountability, how the money flows, who the key partners are, where all the regulators fit and the board’s role in quality and safety

Individual NExT Directors are offered a placement with a provider trust in their area for up to 12 months, depending on each individual’s rate of progression. This will provide the opportunity to learn first-hand about the challenges and opportunities associated with being a non-executive director in the NHS today.

Suggest a candidate

The NHS is now working to identify potentially suitable candidates for the scheme. Do you know someone who you think has what it takes to be a non-executive director in the NHS and has the motivation to commit to a placement as a NExT Director?

If you would like to suggest a candidate please email Keely Howard, Resourcing and Appointments Development Manager keely.howard1@nhs.net

Host a placement

NHS provider chairs are really supportive of the NExT Director Scheme, and many trusts have already signed up and are offering support to placements.

Could you and your trust take part in the scheme by hosting one or two NExT Director placements?

Participating trusts will be asked to offer a range of development support including:

  • Access to board and committee meetings and papers as appropriate, including an opportunity to review and analyse meetings to learn with board members
  • The assignment of an experienced non-executive director mentor for the period to help shape the individual’s personal programme and provide regular feedback and advice
  • Opportunities to shadow key senior staff and meet staff and patient groups
  • A comprehensive local induction programme based on your offer to new substantive non-executives and access to the same training and networking opportunities available to them
  • The opportunity to learn and contribute to the full range of your trust’s organisational challenges, leadership styles and governance structures

If you would like to host a placement please email Carolyn May, Head of Non-Executive Talent and Appointments Team carolyn.may3@nhs.net or Ness Clarke, Senior Non-executive Development Manager ness.clarke@nhs.net

Current chair and non-executive vacancies

View all current vacancies

The NHS are always on the lookout for talented people for their chair and non-executive director (NED) roles. If you or someone you know has the skills and experience necessary to be an effective chair or non-executive director, please contact them at nhsi.chairsandneds@nhs.net.

For other NED vacancies, including NHS roles, sign up for free email notification at https://nedworks.net

Financial crime and modern slavery: the Twitter view

Che Sidanius Global Head of Financial Crime & Industry Affairs / Member of the Coalition to Fight Financial Crime at Refinitiv

John Owens quote

In the fight against financial crime and modern slavery, we engaged experts and social influencers for a live Twitter chat to mark #AntiSlaveryDay. Read their thoughts and join the conversation.


  1. Our live Twitter chat engaged experts on the subject of financial crime and modern slavery, achieving a social media reach of more than three million.
  2. The Twitter discussion, which took place on Anti-Slavery Day, followed our major report examining the true cost of financial crime.
  3. Financial Intelligence sharing, victim-centric approaches, coalitions and data analytics are key to best practice in fighting financial crime and modern slavery.

Financial crime is multi-faceted, multi-national and very often invisible, making it hard to identify, measure and combat.

Our Twitter chat — “Can the chains of modern slavery be broken?” — considered the human cost of financial crime and the role of business in disrupting and dismantling the criminal networks that cause incalculable harm around the world.

The discussion, which took place on Anti-Slavery Day, heard from child trafficking survivor Rani Hong, who is CEO of Rani’s Voice and a former UN special advisor.

Money laundering map

A number of our social influencers in Risk, Compliance and Regtech participated in the live Twitter chat, which achieved a social reach of more than three million.

Read their thoughts below, then download our recent report ‘Revealing the true cost of financial crime’ and become part of the #FightFinancialCrime conversation.

Q1: Could tougher regulation, better compliance processes, bigger penalties or improving information sharing and partnerships help to #FightFinancialCrime?

  • “Blockchain/ Cryptocurrency is being used by human traffickers. We have to make sure that laws are also evolving to deal with these abuses. #BoysAreNotForSale” – Jerome Elam CEO, Trafficking in America Task Force @JeromeElam

Q2: The connection between money laundering through the financial system and human trafficking is not always clear. What more can be done to raise awareness and educate global business to #FightFinancialCrime?

Q3: Do you expect blockchain to help prevent human trafficking by creating a secure identity system?

David Doughty quote
  • “For former victims this could be a tool to protect them from others who could falsify their paperwork”. – Rani Hong, @RanisVoice
  • “#Blockchain is a sophisticated encryption system it is not the panacea to all the world’s ills — it will only help to #FightFinancialCrime & #EndModernSlavery as part of a concerted effort by governments with the political will to do so.” – David Doughty, Corporate governance expert and business mentor @daviddoughty

Q4: What can be done to better identify the source of illicit funds, derived from modern slavery, to fight financial crime?

  • “Working together with law enforcement and the corporate sector we can create better tools to track the path of illicit funds from human trafficking.” – Jerome Elam @JeromeElam
  • “Open up offshore banks and corporations to more scrutiny & ensure all #FIs are subject to regulation — illicit funds enter the system via poorly regulated organisations — they are where the effort needs to be concentrated.” David Doughty @daviddoughty

Q5: What do you think is the most effective way to halt the illicit flow of money from modern slavery into the financial system?

  • “Implement massive fines to make the ratio between risk/reward obvious.” – Mette Kirsten @Mettemoo
  • “Fine business who commit this crime and take the proceeds to help educate people on financial crimes and help restore victims’ lives.” – Rani Hong @RanisVoice
  • “Stop it at the source! Provide better protections for victims and survivors of human trafficking so they will not be terrified to testify.” – Jerome Elam @JeromeElam

Q6: What do you consider best practice in fighting financial crime and modern slavery?

  • “Financial Intelligence Units have started issuing advisories to identify activities potentially linked or leading to human trafficking. This info should help develop typologies that help regulators, banks and others understand this crime better.” – Rani Hong @RanisVoice
  • “A “victim-centric” approach that incorporates survivors into the process of creating methods and laws that attack human traffickers where they are most vulnerable.” – Jerome Elam @JeromeElam
  • “That was why we were so keen to work with Rani and her organization to draw attention to the victims. We are delighted that Rani’s Voice joined the Coalition to Fight Financial Crime.” – Che Sidanius Global Head of Financial Regulatory & Industry Affairs, @CheSidanius
  • “We must use a coalition, trust approach, harness #DataAnalytics, and measure impact. Tools need to be at the front lines, not just law enforcement to shift from reactive to proactive. Follow the money through typologies -> content classifiers -> alerting.” – Global Emancipation, @GblEmancipation

The true cost of financial crime

This is an issue that demands continued exploration and action!

Together with the World Economic Forum and Europol we founded a global coalition to promote more effective information sharing between public and private entities. The membership of the coalition is constantly expanding.

Phil Cotter, Managing Director, Risk, Refinitiv, said: “Increased collaboration is key to fighting financial crime and Rani’s passion and expertise will be invaluable as we work to bring forward innovative, high-impact solutions that help disrupt and dismantle the criminal networks that cause incalculable harm around the world.”

To learn more about this subject, visit Fighting financial crime and become part of the #FightFinancialCrime conversation.

Download our recent report ‘Revealing the true cost of financial crime’

Diversity and inclusion: what’s the risk?

Published in Business Reporter – Fraud Prevention and Risk Management, September 2020

From the Black Lives Matter movement (BLM) to the Environment, Society and Governance (ESG) investment initiatives, the resounding cry is for greater diversity and inclusion in the workforce, and a reduction in inequality and in the barriers to opportunity.

Yet the changes that reduce the dominance of, to put it bluntly, old white men, in the world’s boardrooms are still seen to be happening at a glacial pace.

A Catalyst study of US Fortune 500 companies showed that those with a higher representation of women on their boards of directors outperformed their peers by 53% in return on equity and 42% in return on sales.

And it is not just a matter of race or gender. There is an increasing focus on cognitive diversity to avoid “group-think”, for example where board members are predominantly accountants. There is plenty of evidence to suggest that a lack of cognitive diversity in the boardroom has been a contributory factor in the dramatic corporate failures that we have seen, such as Wirecard and Carillion, and indeed the financial crisis of 2007/8.

In Testosterone, Cortisol and Financial Risk-Taking, Joe Herbert of the University of Cambridge’s Department of Clinical Neurosciences examined how hormone levels in men and women impacted their risk-related decisions. His review of several studies showed connections between higher levels of testosterone and mispricing and “over-optimism about future changes in asset values.”

So, how are diversity and inclusion linked with strategic business risk?

Most boards are aware these days that environmental and reputational risks are likely to be as important as traditional financial risks, if not more so. BP’s failure with the Gulf oil-spill was not caused by financial factors. Nor was it the environmental impact that did the most damage to the company. It was the reputational harm caused by the mishandling of the oil-spill that proved to be the biggest problem.

But few boards consider diversity and inclusion to be a strategic business risk. They may well have ethnic and gender diversity targets for their workforce. Perhaps they report on ethnic and gender pay-gaps in their annual reports. But they will probably regard diversity and inclusion as an HR issue, and not something that should appear on the strategic risk register.

That is all about to change. There is an increasing awareness that creating an inclusive workplace for all, regardless of gender, ethnicity, background, sexual orientation and beliefs, is not just a source of competitive advantage. It also plays a powerful role in shaping the views of stakeholders: shareholders, employees, suppliers and, probably most important of all, customers.

There is a growing view that a lack of diversity and inclusion in the workforce is a major strategic business risk. The existence of a mono-cultural, ‘group-thinking’, exclusive board of directors is an indication that the risk is not being taken seriously: in all probability such a board does not have the skills, experience or even the inclination to address the issues.

Since April 2017, gender pay-gap reporting has been mandatory in the UK. Financial services, which is one of the most important sectors for the UK economy, has a gender pay-gap of about 34%. That is double the national average of 17%.

This is a serious reputational risk, which will influence how stakeholders, including prospective and current employees, customers and regulators, view financial services firms. This makes diversity and inclusion a business issue rather than an HR issue – a business risk that demands to be actively measured, monitored and managed.

Given that diversity and inclusion should appear on the board’s strategic risk register, which aspects should be covered?

There are four main areas:

  1. Strategy The main risks to the development of a successful company strategy, where there is a lack of diversity and inclusion in the board and senior management team, is that poor decisions are likely to be made without a challenge to the status quo. The risk of group-think is that the strategic focus is too narrow, opportunities are missed, and ground is lost against competitors.
  2. Reputation With the immediacy of social media, particularly with respect to customer experience, reputation risk is increasingly important. A diverse board leading an inclusive workforce is much more likely to be able to respond to the needs of a diverse customer base. Boards with only a token attempt at diversity and inclusion, who practice ‘one and done’, are unlikely to convince stakeholders that they are really making an effort. They may well damage the company’s reputation, especially in the eyes of investors looking for exemplary corporate governance practice.
  3. Leadership The Board and Senior Management team should set the tone from the top of the organisation. Ensuring diversity and inclusion is not just a tick box exercise about numbers and percentages. It is about openness and transparency, a willingness to embrace new ideas, and new ways of thinking. Exit interviews with employees these days more often than not highlight a lack of clear leadership as one of the main reasons for staff wanting to work elsewhere. Leaders who are seen to embrace diversity and inclusion have been shown to be more effective than those that do not.
  4. Workforce Businesses which deliberately exclude sections of the community on the grounds of gender, ethnicity or some other characteristic are exposing themselves to prosecution for breaking employment law. More importantly though they are limiting the possibilities for recruiting the right people for the job. This is especially true in the case of sectors where there are skills shortages. The risk to the organisation of not making the talent pool for recruitment as wide as possible is that they will miss out on attracting and retaining the best people and thereby reduce their key source of competitive advantage.

Post COVID-19, businesses are looking at the ‘new normal’ for innovative and improved ways of engaging with their employees, customers, suppliers and investors. Traditional ways of doing business are being questioned as rapid advances in technology enable truly global working. Communities are looking to put an end to discrimination and to create environments with equal opportunities, regardless of gender, race, ethnicity or other characteristics.

Diversity and inclusion are rapidly becoming the ‘new normal’. Directors and their boards need to identify, mitigate and monitor the risks of not acting swiftly enough to ensure that they and their workforces put an end to the mono-cultural, group-think way of operating.


by David Doughty, Chartered Director – Chief Executive, Chair, Non-Executive Director, Entrepreneur and Business Mentor

How can you hold a global bank to account?

The growing #ESG movement (Environmental, Social and Governance) influencing institutional investment decisions and AGM voting intentions is shining the spotlight on the ethical behaviour of corporates around the world – and none more so than the global banking organisations, who are seen by many to have still not atoned for their sins in recklessly causing the 2007/8 financial crash and seemingly getting away with it scot-free.

The growing #ESG movement (Environmental, Social and Governance) influencing institutional investment decisions and AGM voting intentions is shining the spotlight on the ethical behaviour of corporates around the world – and none more so than the global banking organisations, who are seen by many to have still not atoned for their sins in recklessly causing the 2007/8 financial crash and seemingly getting away with it scot-free.

One such bank is the Japanese Sumitomo Mitsui Banking Corporation (SMBC) Group – a multinational banking and financial services institution which operates in 40 countries and is the 14th biggest bank in the world by total assets – the second largest bank in Japan.

Michael Woodford, in his book, Exposure: Inside the Olympus Scandal, has detailed the cultural difficulties in Japan which make effective Corporate Governance challenging, precisely because of the lack of independent challenge from Non-Executive Directors in the boardroom, and the story of Sumitomo and its treatment of the family of one of its most senior employees is another example of corporate intransigence, stubbornness and downright unethical behaviour.

Mr Akihisa Yukawa (Aki to family and friends) was managing director of Sumitomo Financial Group when he died on a business trip at the age of 56 on August 12, 1985.

Akihisa’s grandfather, Kankichi Yukawa, was one of the founding directors of Sumitomo when it was incorporated in 1912, so the family shared a long history with the Bank.

Akihisa Yukawa graduated from Tokyo University’s School of Economics and joined Sumitomo Bank in April 1952. He worked in international banking and was the head of the London Branch from 1976 to 1980. Akihisa was appointed Managing Director and Head of the International Office of Sumitomo Bank in 1981.

In 1984 he was offered the position as chairman of the World Bank in Washington but declined and instead accepted a new role to build the aircraft leasing arm of Sumitomo Bank and became Executive Vice President of the Bank’s leasing subsidiary, Sumitomo Leasing and Finance, where he lead the negotiations to provide the financing for Japanese Airlines (JAL) purchase of 9 aircraft from Boeing – the largest aircraft leasing deal in Japan at the time.

Tragically, Akihisa Yukawa was killed on a business trip from Tokyo to Osaka when Japan Airlines 123 Boeing 747 crashed on 12 August 1985, taking the lives of 520 passengers and cabin crew – still today the worst accident in aviation history.

After the accident, the bereaved family members of those killed in the crash were all compensated by Japan Airlines and their employers, if they were flying on business, for their tragic loss – all that is except two – Aki’s daughter and his partner, who at the time was 9 month’s pregnant with Aki’s second daughter.

Why were they not included amongst the bereaved? – because the Sumitomo Chairman, Ichiro Isoda, decided they were ‘not the bereaved’ and they were not allowed to make any claim for compensation to the bank or the airline.

Notwithstanding the fact that Ichiro Isoda later resigned from his position as Chairman of Sumitomo Bank after taking responsibility for one of the biggest financial scandals in Japan, the nature of Japanese culture with regard to Corporate Governance meant that having made his decision about the fate of Aki’s partner and his two daughters, that decision was final and can seemingly never be reversed.

Aki’s partner, Susanne Bayly-Yukawa, is made of sterner stuff, however, and has fought tirelessly for recognition, more than compensation, of her status and that of her two daughters to be recognised alongside all the others as the bereaved.

Her first success came in 2001, 16 years after the crash, when her persistence paid off and she managed to persuade Japan Airlines to make a token contribution to her daughters’ education – a small victory but an important step in her fight against Japanese bureaucracy

In 2012, Susanne managed to achieve the impossible – the Japanese government made the unprecedented decision to make a posthumous amendment to Akihisa’s important family record, including Susanne and their children as his family.

With a new Chairman having replaced the disgraced and deceased Ichiro Isoda at Sumitomo, this would have been the ideal time for the bank to have a change of heart and recognise the family of one of their most senior employees, Akihisa Yukawa.

But no, Sumitomo still refuse to recognise both British and Japanese proof of Akihisa’s family identity.

So the question remains – how can we hold a powerful global bank to account?

Further reading:

Exposure: From President to Whistleblower at Olympus by Michael Woodford

Secrets, Sex and Spectacle: The Rules of Scandal in Japan and the United States by Mark D West

The risks of carrying on regardless

The need to identify, measure and mitigate business continuity risks has never been more relevant.

Strategic risks stop businesses achieving their strategic goals – they are the big risks, usually coming from outside the business, that are difficult to anticipate and mitigate for.

Key among them is the risk to business continuity: the ability of the business to continue to deliver its goods or services when the fabric of the business – its people or assets – have been affected by a major external event.

The current coronavirus pandemic is clearly one such major event which has brought into sharp focus the business continuity planning of those businesses which are able to continue to operate during the lockdown period.

Business continuity plans are commonplace in most businesses, and usually involve the technical aspects of running a business, such as making sure that the IT systems and stored data are available and accessible remotely. There are, however, some more fundamental risks to business continuity which are often overlooked until the worst happens.

The biggest risk to any business facing an external threat to its operations is financial – the business simply running out of cash while its operations are disrupted. To mitigate this risk, business need sufficient reserves to weather the storm.

Many businesses (and most charities) in the UK live a hand-to-mouth existence with very low levels of cash reserves – usually no more than would be needed to wind down the company, pay off debts and pay redundancy costs, and in some cases not even that.

When something like a pandemic-triggered lockdown occurs, the immediate plan is for as many employees as possible to work from home. But even large multinational companies have found that this is not as simple as it sounds, with emergency investment required in additional hardware such as laptops and increased bandwidth and server capacity.

  1. The first mitigation for business continuity risk is to ensure that there is a “rainy day” fund in your reserves to cover the additional costs the business will face in order to stay operational.
  2. The second mitigation factor is insurance. Make sure you know exactly what is covered, though – many businesses have discovered that they are not insured for the effects of a global pandemic. It may also take time for insurers to pay out so you will need to go back to your cash reserves or make sure you have sufficient borrowing facilities such as an overdraft in place.
  3. Thirdly, you will need to look at your corporate governance arrangements, particularly your articles of association, to ensure that you are legally able to hold board and shareholder meetings electronically. You may need to hold more frequent, shorter virtual board meetings and they will still need to be accurately minuted to record any decisions taken during the crisis period.
  4. The fourth aspect of managing business continuity risk is communication – make sure your staff, suppliers and most importantly your customers are aware of any new arrangements which may apply, even if it is just to tell them that you are still open for business. The ideal is that any changes which are made to the business as a result of a major external event should appear seamless to the customer or end-user. Where this is not possible, communication is vital to minimise the impact to the business.

The increasing reliance on IT systems, software and digital data has meant that most business continuity plans are the responsibility of the IT department, and will in general have little or no visibility at board level – other than to clarify if there is a business continuity plan in place, and whether it has been tested recently.

In fact, business continuity is highly significant in terms of its impact on the delivery of the business strategy and should be considered in detail by the board on a regular basis.

As will be shown by the current crisis, those businesses which have been able to carry on by finding innovative solutions to the delivery of their goods or services are much more likely to be successful post-lockdown – demonstrating the value of looking seriously at the risks facing the business and, where possible, turning them into opportunities and sources of competitive advantage.

First published in Business Reporter https://business-reporter.foleon.com/business-reporter/risk-management-insurance/the-risks-of-carrying-on-regardless/ 23 April 2020

%d bloggers like this: