How Are You Measuring Board Effectiveness?
The FCA has been clear in its messaging around governance. The boards of regulated firms are expected not only to set the tone from the top but also to maintain robust oversight of systems, controls, and governance arrangements. Easy to say, but in practice this means that you need to demonstrate that your board is effective, not only on paper, but in action.
How Are You Really Measuring Board Effectiveness?
Many firms assume that annual ‘performance based’, internal board reviews are enough. Yet the Regulator’s expectations go much further. The FCA wants to see that boards are structured in the right way, that they’re energised, open to scrutiny, ensuring that risks are well-managed, culture is healthy, and decision-making is robust.
What Should Your Board Consider?
Board structure: Does the structure of your board allow for genuine challenge, encourage diverse perspectives and clear accountability?
Board operations: How regularly do you meet? Are your meetings focused, evidence-driven, and documented in a way that demonstrates oversight of your business (and that means all of it, not only the financials)?
Board outputs: Do outcomes of the decisions you make align with regulatory expectations and long-term business sustainability?
Assessing Individuals as Well as the Collective
Board effectiveness isn’t just about the collective. Each individual board member carries their own personal responsibility too, so on that basis how are they assessed individually?
What you should consider
- How do we assess each board member’s contribution?
- What do we assess? Are behavioural and cultural factors considered alongside technical, product and market knowledge, skills and expertise?
- Would every leader of the business be comfortable having a one-to-one conversation with the FCA about the board’s effectiveness and their personal role within it?
Who Should Undertake Board Effectiveness Reviews?
Another question we’re often asked is “who is responsible for undertaking these reviews”? Aside from internal, annual reviews, firms should consider a broader range of assessments including those undertaken externally. Don’t forget that independent perspectives often bring insights that internal reviews miss, without the bias and internal politics attached.
A Call to Action
So, ask yourself: Would your board and each of its members be able to evidence effectiveness if the FCA asked tomorrow?
At Chameleon Compliance we work with boards and senior leaders to design governance assessments that go beyond compliance. Our approach helps boards to demonstrate effectiveness, both collectively and individually, while building resilience for the future.
Contact us if you’d like to explore how your board measures up.