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The unsung hero of corporate resilience

Why strong Board governance is essential

The current business landscape is a constant dance with uncertainty. Economic headwinds, geo-political challenges and unforeseen market shifts can all threaten a company's stability. In this dynamic environment, the role of a strong Board of directors is of paramount importance. The findings of our latest Deloitte Restructuring Survey 2024 underscore this critical truth: companies with weak Board governance are far more susceptible to financial distress. 

Consider the core responsibilities of a Board: setting the company's strategic direction, overseeing management performance, and safeguarding shareholder interests. Each of these functions hinges on a Board's ability to ask critical questions, challenge assumptions, and hold management accountable.

Why strong Boards matter

  • A well-functioning Board acts as a strategic compass, providing independent oversight, fostering sound decision-making, and ensuring robust risk management practices. These are precisely the elements that equip companies to weather unforeseen storms and navigate periods of turbulence.
  • In addition to weak Board governance, the Deloitte Restructuring Survey 2024 highlights cash flow management and inadequate financial controls as internal risks likely to cause distress. A proactive Board, actively engaged in financial oversight, can identify and address these concerns before they escalate. Early detection of financial vulnerabilities allows for timely corrective action, potentially preventing a downward spiral into financial distress.
  • The benefits of strong Board governance extend beyond financial stability. It fosters a culture of transparency and accountability, attracting and retaining top talent. Investors, too, place a premium on good governance, recognising the link between robust oversight and sustainable long-term growth.

Building a strong Board

The survey's stark theme – that weak Board governance is likely to trigger distress – should serve as a clear call to action for corporate leaders in both healthy and stressed businesses. The survey does not only illuminate this challenge; it offers recommendations to address it. By investing in Board development programs about governance processes, fiduciary duties, monitoring of financial distress; strengthening the Board with experienced turnaround directors and fostering proactive and open communication, companies can cultivate a governance structure that empowers directors to fulfil their critical roles.

The survey results are clear: strong Board governance is not merely a corporate nicety, but a cornerstone of corporate resilience. In a world brimming with uncertainty, fostering a strong Board of directors is an essential first step toward navigating the challenges and seizing the opportunities that lie ahead.

Read the full Deloitte Restructuring Survey 2024 here.