Directors' roles in assessing strategy.

• Author: Heffes, Ellen M.
• Position: BOARDS OF DIRECTORS

In the current volatile climate, corporate boards must understand their companies' risk exposure. But to do so effectively, they must feel comfortable asking senior management the right questions, notes a new report from The Conference Board.

"A board of directors should not miss the opportunity to fully re-evaluate the company's business plan for the coming 12 months," says Mark S. Bergman, co-head of the capital markets and securities group at Paul, Weiss, Rifkind, Wharton & Garrison LLP, and author of the study, Assessing Corporate Strategy: Liquidity Needs, Strategic Transactions, Internal Controls and Disclosure.

Bergman says the board should "assess the impact on corporate objectives of projected cash flow, the limited availability of bank debt, the potential restrictions on the company's ability to raise equity or debt through the capital markets and the fixed component of the company's cost structure."

Based on the preliminary review, the report notes, board members should: determine whether capital expenditures can be deferred; discuss whether elements of the growth strategy should be deferred and potential effects; evaluate opportunities to cut costs as well as the implications; and identify the factors that could contribute to an adverse action by rating agencies and design preventive measures.

This report, the second in The Conference Board series "The Role of the Board in Turbulent Times," identifies "pressure points" for boardroom discussions on how to reassess corporate...