Common Board Effectiveness Challenges
When we undertake board effectiveness reviews, there are a number of findings that arise time and time again. While boards of regulated financial services firms typically demonstrate strong commitment and diligence, even the most experienced and well-structured boards encounter both structural and behavioural challenges that can limit governance effectiveness.
Common issues include the volume and clarity of information provided, as well as the dynamics of discussion and decision-making in the boardroom.
This article outlines six challenges we often identify through our board and governance effectiveness work. For each, we provide key questions designed to prompt reflection and support continuous improvement.
1 - Balancing Risk, Regulation and Strategy
In heavily regulated sectors, there’s a clear tendency for board agendas to become dominated by regulatory, risk and compliance considerations. While this is understandable - and often driven by regulatory expectations and requirements (ICAAPs, Operational Resilience assessments etc), this required focus can come at the expense of strategic thinking and customer insight.
Key questions: Is the board spending enough time on forward-looking strategy and understanding customer needs, or is attention overly weighted toward regulatory matters? Is the board delegating appropriately to the Risk or Audit Committee to address some of the more technical considerations in this space?
“The board should assess the basis on which the company generates and preserves value over the long-term. It should describe in the annual report how opportunities and risks to the future success of the business have been considered and addressed, the sustainability of the company’s business model and how its governance contributes to the delivery of its strategy. ”
2 - Reporting and Management Information
The length and complexity of board packs continues to be a real challenge that we typically see. But the deeper issue is the purpose behind the reporting. Often, information is formatted for executive audiences rather than curated for specific decisions or discussion at the board level.
Boards benefit when management clearly distinguishes between information for noting, discussion, and decision. Boards, in turn, can help by being clear about what they find helpful, and what they don’t. Better signposting, shorter papers using an agreed standardised format, with clearer framing of decisions and the ask of the board can go a long way. Company Secretaries are often placed in a very challenging position as the timescales for pack production are truncated and don’t allow for active feedback and refinement of board papers prior to circulation.
Key questions: Is the board receiving the right information, in the right consistent format, to support effective decision-making? Is there sufficient time built into reporting timetable to allow for feedback and refinement of material prior to circulation? Does the board receive insightful reporting and MI to support effective oversight without unnecessary detail?
“The PRA considers the provision to the board by executive management of timely, accurate, complete and relevant management information, including the aggregation of exposures across businesses, to be a fundamental component in supporting the board to fulfil its duties and responsibilities. The nature, specific content and frequency of the management information provided to the board and its committees should be actively managed by the chair and non-executives, taking into account their particular needs. The chair and non-executives should also actively guard against the risk that they are provided with such extensive and unwieldy amounts of data which render it unworkable in a practical sense. ”
3 - Board Composition and Skillsets: Getting the Mix Right
Regulatory expectations are high regarding the need for there to be risk, compliance, operational resilience and regulatory expertise on boards. That’s obviously an important consideration, but the risk is that this can unintentionally crowd out commercial, operational and customer perspectives if not managed carefully.
In addition to careful consideration of current and future skillset requirements when recruiting NEDs, some Boards have benefited from strategic use of external advisers or specialist sub-committees to ensure appropriate focus and expertise is applied to challenging areas.
Key questions: Does the board have the right mix of skills for the firm’s long-term success - not just regulatory compliance? How effective is the regulatory engagement of the firm to ensure regulators understand the board composition and succession planning strategy?
“Even a broadly constituted and well-experienced board cannot necessarily be expected to have expertise in every aspect of a broad and complex financial business. The point is to have the diversity of experience and capacity to provide effective challenge across the full range of the firm’s business and the opportunity to explore key business issues rigorously. Sometimes that may require the board to understand and reach decisions on complex technical, legal, regulatory or other issues. It is the responsibility of the executives to explain such issues in clear and transparent terms that enable the board to exercise their collective judgement and, where necessary, non-executive directors should be able to call on appropriate professional advice, although the directors will always remain ultimately and collectively accountable for all the board’s decisions. ”
4 - Approach to Decision-Making
Board meetings are information-heavy, time-pressured, and often packed with complex decisions. Yet traditional decision-making processes haven’t always kept up.
Several techniques are being used more frequently to support stronger decisions: from structured pros/cons discussions, to red team/blue team methods, and dedicated “challenge roles” during meetings. These approaches take time to embed, but when done well, they can improve both the quality and confidence of board decisions.
Some Boards are also beginning to rethink meeting design, acknowledging that human concentration is limited, and that the length and density of some sessions may reduce effectiveness rather than enhance it.
There is a behavioural aspect to decision making - this means designing meetings and discussions that draw out different perspectives, test assumptions, and synthesise insights. It also means ensuring that all voices are heard - not just the most experienced or confident
Key questions: Are board decision-making processes designed to handle complexity and challenge groupthink? Is there a lack of creativity in decision-making approaches? Do time limitations constrain thoughtful debate and discussion?
“Well-informed and high-quality decision-making does not happen by accident. Many of the factors that lead to poor decision-making are predictable and preventable. Boards can minimise the risk of poor decisions by investing time in the design of their decision-making policies and processes, including the contribution of committees and obtaining input from key stakeholders and expert opinions when necessary.”
5 - NED Engagement Beyond the Boardroom
There’s no one-size-fits-all answer to how involved Non-Executive Directors (NEDs) should be outside formal meetings. But where expectations are unclear, engagement can become inconsistent.
Boards benefit from structured opportunities for NEDs to engage with management or key business areas in a way that supports insight, but avoids drifting into execution. Clarity around role boundaries, time commitments, and desired outcomes helps NEDs contribute fully and confidently. Such engagement can also help with executive level succession planning and talent development.
Key question: Is there a shared understanding and agreement on what meaningful engagement looks like for NEDs between meetings? Does this allow insight into progress with strategic, operational and cultural initiatives, bringing additional perspectives that support the board?
“It is important that non-executive directors do not operate exclusively within the confines of the boardroom, but have a good understanding of the business and its relationships with significant stakeholders. Accordingly, it is advisable for them to take opportunities to meet shareholders, key customers and members of the workforce from all levels of the organisation.”
6 - Organisational Culture
Board members are expected to oversee and understand the culture of the organisations they govern. But culture is hard to assess from board papers alone.
Boards that succeed in understanding and influencing culture often combine quantitative indicators (e.g. conduct data, staff survey results) with qualitative insight (e.g. site visits, informal conversations, observation of leadership behaviours, whistleblowing analysis). They take time to reflect on whether the tone in the boardroom aligns with the culture they hope to see across the firm. They are also courageous in dealing with senior management behaviours when required.
Key question: Does the board have sufficient visibility of how things really work on the ground? Are they holding the most senior management to account in shaping the right culture for the firm?
“The focus on culture needs to be continuous. Periodic reflection on whether the culture continues to be relevant in a changing environment can help the company adapt its culture to ensure it continues to support the company’s success. The board is expected to assess and monitor culture for alignment with purpose and values.”
Final Thoughts
Boards operate in an increasingly complex environment -often defined by evolving regulatory requirements, strategic volatility, and heightened expectations for transparency and oversight. The challenges outlined above are not indicative of dysfunction, but rather inherent to the nature of contemporary governance.
What distinguishes high-performing boards is not the absence of friction and complexity, but their capacity to confront such challenges directly, engage in rigorous self-examination, and adapt with clarity and purpose.