The Role of Compliance when Appointing a NED

Do you have a Non-Executive Director (“NED”) on the board or are you thinking of appointing a NED?

Some larger financial services organisations are now appointing two to three NEDs to their respective bords, to focus on various aspects within the firm.  London, a world leading financial centre, has adopted the concept of NEDs, and now other countries are adopting a similar stance to the benefits of NED appointments. More and more NEDS are being appointed to strengthen and demonstrate a strong governance regime both here in the UK and abroad.

Often when onboarding a NED if you ask a compliance officer “what are your risks?”, they look at you with a blank face. A lot of financial firms simply process the approval and don’t consider it much further than “are they competent to do the role?”. It is simply dealt with via the compliance registration process with minimal thought having taken place between senior compliance members.

Some thought provoking questions

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Embracing the pending arrival of the NED(s) is key to success?

Some questions that could be considered to spark debate and thoughts:

Has the NED had a business relationship with any of the board members before?
  • This is critical to consider and often compliance have not even asked the question
Have previous boards been able to retain the NED for the intended length of contract?
  • Typically, NEDS have two-year appointments at firms.  
  • Have you got insight into why the NED had an early exit and why did the board let them leave before their contract expired?
  • Have they served too long?

A well-designed process through the whole appointment process will mean the firm and compliance will have less problems going forward. Happy NED, Happy Firm.

It is not uncommon for a bad audit to lead to criticism of the NED only to compound and make things worse.

Compliance – it is time to take this risk more seriously; time to wake up!!!

  • Dadmin
  • July 12, 2021

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