Trent Fleming 2017-12-13 00:04:08
Bank presidents and CEOs have many roles. One of the more difficult ones is board of director training because it requires that a broad range of disciplines be addressed. At its heart, a good board of directors provides corporate governance, insists on a proper system of internal controls and addresses the management of risk within the context of the lines of businesses of the organization. It sets out, via policy, the way the organization is to be managed and operated, and must then develop monitoring processes to ensure management follows these directives. An effective board must understand all of the key areas of operating a bank at a functional level. Gone are the days of “trusting” management to do the right thing. Today’s complex environments, ranging from investments to compliance to technology, demand that a board understand and intentionally oversee the bank’s operations. To be effective, training has to be focused and well-presented. You should make use of a variety of resources, including those within the bank, that can address matters of accounting, finance, compliance and lending, as well as outside parties that can address cybersecurity, investments and succession strategies. Regulatory trends are toward more director knowledge, more board involvement overall and more scrutiny of director activity. Cybersecurity alone has become a huge business issue, deserving the attention of everyone in the bank. Yet it is directors who are ultimately accountable for directing the preparation, implementation and even response to cyberthreats. While recent proposals from the Federal Reserve seek to lessen the management obligations of the board relative to regulations, banking will remain a highly regulated activity, and proper oversight from the board will include attention to such matters. BASIC TRAINING While complexity is certainly a factor, there is also an element of predictability. Year in and year out, banks are faced with the same basic challenges and key operating areas really do not change. Thus, an effective director training program will have a calendaring focus so that, annually, directors are exposed to updated information around each functional area, while being reminded of the basics of those areas as well. Periodically, targeted outside training can be leveraged to focus on areas that are perceived as weaknesses, or to provide additional information for new areas into which the bank intends to move. Finally, there must be a “new board member” training process, so that these individuals are brought up to speed as quickly as possible. WAYS TO HELP Seek to involve your directors in a variety of bank activities. One area where I often find an issue is in committee involvement. Directors will remain on selected committees (loans, investments, compensation) year after year because they are comfortable there. I suggest fixed rotation periods to provide broader exposure for each director, thus strengthening the board overall and adding to the quality of group discussions over matters that arise. On the technology and cybersecurity side, I suggest that outside directors be rotated through the IT steering committee on an annual basis, again to expose them to key topics and provide them a better understanding of fundamentals of managing an area with which many are hesitant to become involved. A regular program of executive sponsorship and contact with your board, outside of board meetings, is another way to improve involvement, by keeping directors current on selected matters, reminding them of their duties, even suggesting articles they may want to read. While this adds to the typical workday burden of executives, I find that it pays benefits in terms of improving the overall involvement of the board. Finally, while not directly a training matter, don’t neglect involving your board members in business development activities — that should be one of the reasons you selected them in the first place. In addition to drumming up new business, director involvement serves to educate them about bank products and services, the needs of your customers and the impact your bank is having in the community overall. A well-documented and organized training program will help your directors become better at their jobs and demonstrate to the regulators that the bank is committed to that end. Take time now to address this important issue and prepare your board for the challenges ahead. A 30-year industry veteran, Trent Fleming has helped hundreds of banks make strategic decisions about the optimum use of their management and technology resources. He speaks regularly to banking groups on technology, management and strategy. He serves on the faculties of the Graduate School of Banking at the University of Wisconsin- Madison and the Advanced Banking School at Penn State. For more information, visit www.trentfleming.com.
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