Magnetic forces in board decision making

The recent Hayne Royal Commission generated much commentary on the behaviour of banks and other financial institutions, and their preoccupation with profits over compliance (‘performance’ over ‘conformance’) has been a dominant theme.

Risk managers in many of these large organisations have been treated as blockers of growth, and consulted late (if at all) when new initiatives were being implemented.

The not-for-profit sector has also been inclined to treat risk management, and compliance with regulations and standards, as a distraction from their strategic activity rather than as an essential element of wise governance.

The schematic above seeks to capture the ‘creative tension’ between the ‘push‘ of response to changing needs and the desire for growth, and the ‘pull‘ or resistance of working within boundaries.

As with all such diagrams, it oversimplifies the factors at work when boards are making decisions of course. Nonetheless it highlights the need for balance between performance and conformance considerations, and recognises the importance of ‘doing the right things in the right ways’.

Not mentioned in this chart is the risk of not making a decision or taking action, and this too needs to be assessed when making strategic decisions.

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