Introduction

Corporate resilience is an organization’s preparedness to deal with and adapt to adversities or unexpected occurrences or disruptions to its business. The crux of corporate resilience is the ability of an organization to maintain business continuity while dealing with unexpected occurrence and adapting to new realities.

The recent COVID-19 pandemic amongst other things has reinforced the need for organizations to prepare for the unexpected. This article seeks to examine how corporations can effectively use board evaluations as a tool for building corporate resilience.

Board evaluation refers to the process of examining the operations and processes of a board and its members along the lines of effectiveness, quality of decision making and strategy and relationship with executive management.¹ Board evaluations aim to identify the strengths and weaknesses of the board, as well as the areas for improvement and development. Regular board evaluations undertaken as part of an organization’s corporate governance practices helps build a strong board which in turn builds corporate resilience.

How board evaluations enhance corporate resilience

Regular board evaluations are essential for fostering corporate resilience. By pinpointing areas of strength and weakness within board operations, evaluations empower companies to adapt and excel in a dynamic business landscape. Additionally, board evaluations contribute to corporate resilience in the following ways:

1. Enhancing board diversity

Board evaluations serve as a valuable tool in identifying any shortcomings regarding board diversity. They enable the board to assess whether it possesses the necessary blend of expertise, perspective, background, and tenure to effectively oversee the organization's strategic direction, risks, and opportunities. This, in turn, facilitates the appointment and retention of qualified and capable directors, ensuring a diverse board composition. A diverse board, characterized by a rich mix of skills, experiences, perspectives, and independence, is better equipped to fulfill its duties and responsibilities. Consequently, it is more likely to navigate disruptions successfully and emerge stronger than a less diverse counterpart.

2. Strengthening board culture, dynamics and communication

Board evaluations can assist the board to foster a positive and constructive culture that promotes trust, respect, collaboration, and diversity among board members. Board evaluation can also help boost board dynamics and communication, both internally and externally, and to address any issues or conflicts that may arise amongst board members or between the board and the management; such that, minor conflicts do not jeopardize the board’s continued existence.

3. Identifying gaps that may impair board performance

Board evaluations serve as a vital tool in identifying and analyzing any gaps that may hinder the effectiveness and efficiency of the board. These evaluations enable boards to recognize areas of weakness, disagreement, or difficulty, paving the way for proactive measures to address them. Through thorough assessment, boards can develop and implement solutions to resolve or mitigate these issues, thereby bolstering their capacity to navigate challenges effectively. By effectively addressing these concerns, organizations can enhance their corporate resilience and readiness to withstand future disruptions.

4. Proactive risk management

Board evaluations serve as a proactive tool for enhancing the company's resilience through robust risk management. By meticulously assessing the board's effectiveness in overseeing risk management strategies, evaluations illuminate potential weaknesses that might otherwise go unnoticed. This proactive approach empowers the board to identify and address risks at an early stage, mitigating their impact and bolstering the company's overall resilience. In essence, board evaluations enable a forward-thinking approach to risk management, ensuring that the organization is well-equipped to navigate challenges and seize opportunities in today's dynamic business landscape.

5. Improving stakeholder relationship

Board evaluations can help the board to demonstrate its commitment and contribution to good corporate governance, and to enhance its transparency and accountability to the shareholders and other stakeholders. Board evaluations can also help boards improve their reputation and credibility in the market, and to increase confidence and trust among investors, customers, employees, regulators, and the public.

Conclusion

The Nigerian Code of Corporate Governance, 2018 (NCCG) underscores the importance of annual board evaluations as a fundamental practice for board effectiveness. These evaluations provide a structured framework for assessing the commitment and performance of individual directors, board committees and the board as a whole, ensuring their collective contribution to the organization’s success.

Regular evaluations equip boards with the insights and foresight needed to proactively address uncertainties and prepare for unforeseen challenges. By fostering a culture of continuous improvement and adaptability, organisations can enhance their resilience and agility, enabling them to navigate disruptions and unexpected changes with agility and confidence.

By embracing the practice of regular board evaluations,² organisations position themselves to thrive in today’s dynamic and uncertain business environment. They become more flexible, responsive and resilient, capable of not only surviving but also thriving amidst challenges and uncertainties, thereby securing their long-term sustainability and success.

At Adcax Nominees Limited, we pride ourselves in supporting our clients' business in navigating the intricate landscape of corporate governance. From navigating regulations to establishing sound structures ensuring seamless compliance, our expert team is here to guide you every step of the way. Let us ensure your business operates with transparency, accountability, and long-term success in mind. Reach out to us today via email at adcaxnominees.nigeria@dentons.com to learn how we can assist with your corporate governance compliance issues.

1. www.thecorporategovernanceinstitute.com
2. Principle 14 of the NCCG 2018