How do you engage board members in financial planning and budgeting?

Engaging board members in financial planning and budgeting begins with understanding their role and expectations. Clearly communicate the organization's financial goals, challenges, and opportunities to the board, providing them with relevant data and context. Tailor presentations to highlight key financial metrics and trends that align with the board's strategic oversight responsibilities. Encourage active participation by inviting questions, feedback, and suggestions, fostering a collaborative approach to financial decision-making and ensuring alignment with the organization's mission and objectives.

In my experience , Board should be actively engaged in Planning and Budgeting. The planning and Budgeting should begin with the objective statement which should be decided by the Board like revenue to increase by 25 percent or cost to be reduced by 10 percent or market share to increase by 10 percent. Final Budget need to be approved by the Board. There should be at least two Board meetings prior to the finalization of the Budget. In the first meeting where the objective setting is being done and the final approval of the budget.

? Understanding your board's role and expectations extends beyond financial matters. It's crucial to discuss their broader governance responsibilities, strategic objectives, and risk tolerance. This dialogue helps align financial planning with organizational goals and ensures transparency and accountability. Additionally, establishing effective channels for communication and decision-making fosters a collaborative relationship between management and the board, enabling timely and informed decision-making. By proactively engaging with the board and addressing any discrepancies in expectations, you can build trust and facilitate smoother financial planning processes.

The role of board members in financial management and budgeting is crucial for the success and sustainability of an organisation. But the exercise of fiduciary and performance related responsibilities does not commence with financial oversight. It begins with developing and agreeing the organisation’s strategy (aspirational objectives and outcomes). Board members are responsible for overseeing and approving the organisation’s financial policies, budgets, and financial statements in support of strategic trade offs, and ensuring that the organisation's financial resources are managed effectively and in accordance with legal and ethical standards. This requires a sophisticated ability to analyse strategic and financial information together.

This is an ongoing exercise as most boards bring on new members annually. I find it most effective to set a recurring agenda item to address.

Added to the training mentioned, the chairperson plays a significant role in educating board members in financial governance to ensure that they have the necessary knowledge and understanding to fulfil their responsibilities effectively. The chairperson's role in educating board members in financial governance includes the following key aspects: 1. Providing Guidance and Support 2. Facilitating Training Sessions 3. Encouraging Continuous Learning 4. Promoting Transparency and Accountability 5. Feedback and Evaluation Overall, the chairperson plays a crucial role in educating members in financial governance to strengthen the board's capacity to oversee financial affairs effectively and ensure financial sustainability and accountability.

In addition to workshops and training sessions, providing board members with relevant resources, such as financial reports, industry benchmarks, and case studies, can deepen their understanding and application of financial concepts. Encouraging board members to ask questions and engage in discussions during meetings further enhances their learning and promotes a culture of continuous improvement. Moreover, offering ongoing support and mentorship from experienced board members or financial professionals can help reinforce their knowledge and confidence in making sound financial decisions. By investing in their financial literacy, you empower your board to fulfill their oversight role effectively and contribute to the organization's success.

In the realm of cybersecurity - this issue is most effectively addressed by leveraging on-demand cyber risk quantification (CRQ). This tool allows CISOs to easily communicate how much the organization, for instance, is likely to lose, on average, within the upcoming year due to cyber activities. CRQ also highlights the exact reduction in this financial exposure due to various cyber security control upgrades. Board members don't inherently understand the implications of what "average time to containment" means. So, instead of leaving them to interpret the monetary consequences of such a metric, translate it directly for them and create a tangible awareness of the connection between cyber risk managment and finances.

In my experience, the non financial background Board members should be provided better insights of the financials by the CFO. It is the responsibility of the CFO to take appointment with such Board members prior to the Board meetings to take them through the financials so that during the Board meeting they could contribute in the discussion. Even in my experience, Auditors also engaged with the Board members prior to the Board meeting.

Every business has it’s own unique KPI’s given industry, market, etc. Your board members may be from varying backgrounds, so it is essential to set standards on financial jargon & clarity on assumptions behind key KPI’s. Typically what’s shown to the board is what’s shown to external investors, meaning the financial story should be comprehensible by all. But in certain situations, board members may need to be educated on internal KPI’s or analyses. In those cases, be sure to bring in teammates who will be able to clearly article those metrics.

?? Furthermore, you can organize training sessions or workshops specifically tailored to the financial aspects relevant to your organization's industry or sector. This targeted education can deepen your board members' understanding of industry-specific financial concepts, regulations, and challenges, enabling them to provide more informed oversight and strategic guidance. Additionally, fostering a culture of continuous learning and development within the board can encourage members to stay updated on emerging financial trends and practices, empowering them to adapt their strategies and decisions accordingly.

Getting the board to understand the financial needs of the cybersecurity department has historically been an issue for CISOs, considering the technical nature of cyber terms and metrics. However, by leveraging financial cyber risk quantification, CISOs can translate this information into monetary implications and actively engage with board members, aligning their budget allocation with the realities of cyber risk. When boards know how much they're likely to lose due to digital activity, they can plan risk appetite and tolerance levels accordingly and balance business profit with maintaining resiliency. Boards are eager to understand how cyber can drive the business mission. With CRQ, the CISOs can provide the necessary information.

Transparent communication builds trust and fosters a culture of accountability between the board and management. By sharing information openly, you demonstrate integrity and promote a sense of mutual responsibility for the organization's success. Regular communication ensures that board members have access to timely and relevant information needed to make informed decisions. Transparent updates on key issues, performance metrics, and strategic initiatives enable the board to provide valuable insights and guidance. Regular communication aligns the board's goals and expectations with management's actions and transparent discussions on strategy, performance, and challenges ensure that everyone is working towards common objectives.

?? Moreover, consider adopting user-friendly data visualization tools or presentations to make complex financial information more accessible and comprehensible for board members. This can enhance their ability to grasp key financial insights quickly and participate more actively in discussions. Additionally, create opportunities for one-on-one sessions or small-group meetings to address individual board members' specific concerns or provide additional context on financial matters. By fostering an environment of open communication and transparency, you can build trust and collaboration between the board and financial management.

CISOs and cybersecurity leaders need to keep their boards updated on the organization's financial exposure due to cyber risk. When board members have a tangible understanding of the amount the business stands to lose due to digital activities, they're much more likely to invest the necessary budget and allocate resources to ensure this potential loss is reduced to a value that falls in line with risk appetite levels. By leveraging on-demand cyber risk quantification, CISOs can present an objective, data-driven overview of this financial exposure, making sure boards maintain a realistic idea of what's at stake.

Engaging your board effectively in financial planning and budgeting involves providing timely and accurate financial information, such as monthly or quarterly reports, cash flow statements, and variance analyses. Transparency is key. Explain the rationale behind financial decisions and discuss challenges and opportunities. Advocate for open communication, inviting board members to ask questions, voice concerns, and offer suggestions. Their insights can inform strategic decisions and ensure the sustainability of your organization's mission. By fostering a collaborative approach to financial management, you empower your board to make informed decisions that align with your organization's goals.

Not all board members can read thick financial documents and make sense of it. I have been there. When I work with boards and/or part of boards, I look at making financial matters more interesting and simplified. The numbers themselves don't say much to me, however the insights and notes and my 10 point checklist helps. That said, my recommendation: Implement a Financial Dashboard that provides real-time updates on the organization’s financial status. This dashboard should be accessible to all board members and include key metrics such as cash flow, revenue, and expenses. If in a digital platform, set up automated alerts for significant financial events, of course subject to prior checks by the exec, before board intervenes.

?? Additionally, consider conducting regular board assessments to identify areas where members can contribute most effectively. Encourage board members to participate in relevant training or professional development opportunities to enhance their financial acumen and strategic planning skills. Furthermore, establish clear expectations and responsibilities for board members regarding their involvement in financial matters, ensuring alignment with the organization's mission and objectives. By harnessing the collective strengths and resources of your board, you can enhance financial decision-making and drive sustainable growth for your organization.

Recognize that when it comes to allocating resources to the departments that don't more 'traditionally' contribute to business growth (e.g., marketing, sales), the board still needs a means of discussing said allocation in terms they understand. For example, when it comes to cybersecurity spending, don't try to convince them to invest more using fear (high risk of cyber events) or convoluted metrics. Instead, leverage their strength in the financial arena and translate complex terms into monetary value - such as "There is a 1.7% chance that, within the upcoming year, our organization will experience a data breach that will cause $2 million worth of damage." With this tangible context, boards are more likely to invest the needed resources.

I was on 3 boards and the chair and I created the following, which boosted the morale: Create a Board Recognition Program that highlights the financial contributions and successes achieved through the board’s efforts. This can be done through public acknowledgment during meetings, personalized thank-you notes, or even a dedicated section in the organization's annual report. Bring in execs on nominated champions at townhalls to talk to this, and share this collaboratively