NEDS still needed – with important reforms

The government’s non-executive directors (NED) started in 2005 with an emphasis made by the coalition government in 2010 to attract experts with commercial experience largely drawn from the private sector. Now in its 10th year, the initiative is explored in the government Lead Non-Executive’s Annual Report.

Our opinion is that good progress has been achieved in some areas, but a lot more can be done by these external experts. Their thematic focus areas of contribution have been the management of talent, business plans, arms length bodies, major projects and risk management.

The Chancellor’s programme of demanding efficiency and delivering up to £20bn in savings by 2020 and these NEDs could play an important role in this reform agenda.

Our policy recommendations focus on NEDs to clearly stipulate the role they have played in promoting innovation and driving risk management. These initiatives should be clearly stipulated in the Annual Report for each department. Our proposals include:
1. Contribution to promoting innovation and achievements

The world will be a different place in five years time at the pace of technological and process innovation. The objective is to make each lead NED describe the role they have played in promoting innovation citing examples and efficiency savings. We feel that this is one area NEDs could take a more strategic leadership in advising on initiatives to promote innovation. For example, these could include implementation of a reward system to pay for those who successfully bring ideas and products so that risk taking can be encouraged.

2. Contribution to promoting risk management and achievements

The risk management processes in Whitehall have lagged in adopting best practices in commercial risk management techniques and as such have not kept in line with commercial developments. Whilst good progress has been done on risk management of major projects and arms length bodies; more work is required in promoting a network of audit and risk committees where risk management and lessons learned are openly discussed across departments. Our policy paper in 2013‘Black Swans Means Business’ may give some new ideas to NEDs.( Moreover, some NEDs should be recruited with a strong risk management who can bring some balance to the current skill set.

Finally, the government’s policy on an active NED role should be commended. Increased focus on risk management and innovation will improve the effectiveness of this role. Failure to do will result in a missed opportunity for the country as a whole.

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