Making the transition from internal audit to a NED
Rosemary Hilary FCCA talks about life as a Non-Executive Director (NED).
Journey to becoming a NED
During the course of my executive career I spent a number of years as a senior supervisor at the Bank of England and then the Financial Services Authority (FSA). I also ran the department that was responsible for authorising all new financial services firms and approving the people who would run them.
This all led to a strong interest on my part in strategy and business model analysis; what makes organisations tick; why some boards work better than others. My role involved interviewing prospective and current NEDs and the idea formed in my mind that one day I might become a NED myself.
Making the transition
As the FSA transitioned into the Financial Conduct Authority I decided to explore other executive opportunities and moved to TSB Bank – it was an ExCo role and that further rounded my profile. In the summer of 2015 I suddenly received a flurry of calls from headhunters about interesting NED roles. I realised that my skills were very much in demand, particularly as a qualified accountant and with my risk background, where there is a key role to play in chairing audit and risk committees. What helped a lot was that I had been on the board of Shelter, the national homelessness charity, for six years. Nevertheless it was a very tough decision to signal the end of my executive life by resigning from TSB.
By the time I had worked my six months’ notice at TSB, I had four NED roles lined up. In fact my last day at TSB was 31 March 2016 and on 1 April I was at the Pension Protection Fund (PPF) on a day’s induction! As well as the PPF, I am on the boards of Vitality Life and Vitality Health, Willis (the global insurance broker) and Record plc which manages foreign currency solutions. In each case I chair either the risk or audit committee (in two cases these are combined).
Adapting to NED life
One of the questions I was asked in interviews for my NED roles was, having had a very busy executive life, whether I would be able to step back enough and resist any temptation to become involved in decisions that are the executives’ responsibility. But I was very confident on this point. I felt and continue to feel that I have earned my stripes as an executive and have no desire to cross that line. What interests me far more is ensuring there is a sound strategy and an appropriate risk framework with all that that entails.
The financial services senior management regime
Following the financial crisis, the regulators have introduced a new regime for senior managers to make their personal responsibility more clear. This applies to certain board members – most relevant for me personally is that it includes the chairs of the audit and risk committees. Certain other NED roles are not covered. I know this has created a lot of nervousness among NEDs. For my own part I have always considered that the role of a company director carried great responsibility.
What the new rules have impressed upon me though is the need to be even more careful in doing my own due diligence on any organisation I might join. In a sense you are lending your personal brand to that firm so it is important to ensure it is one that shares the same values and culture as yourself. I have heard it said that these new rules blur the distinction between the NED roles and those of the executives but I don’t see that at all. Neither do I see that, if something goes wrong in the organisation, there would be any more of a tendency to ‘blame’ the NEDs in particular.
Relationships with the executives
A lot is written about the role of NEDs to ‘challenge’ the executives and of course that is an important part of the role. But that makes it sound as if all meetings need to be combative and that is certainly not the case. It’s important to realise that being a NED is not just about turning up for board meetings. I see it more as the NEDs being on a journey with the executives and that journey takes place outside the board room as well as inside it. By building relationships and truly understanding the strategic backdrop and the strengths and challenges of the organisation, it becomes possible to temper that challenge with support. At the end of the day, the NEDs want the company to succeed as much as the executives do.
One of the benefits of chairing the audit or risk committees is that you get to see through to the heart of the business and to ‘follow the money’. And those roles also entail a close relationship with the risk and audit teams: one of the changes brought about by the crisis was a move to strengthen the independence of the chief risk officer and chief audit officer by giving them a primary reporting line to the chair of the risk committee and chair of audit committee. This gives me another opportunity to understand what’s going on. And I also see my role as supporting and to an extent mentoring those colleagues.
Information flows to the board and board committees
This is always an area of discussion - how much is enough? Of course there is no right or wrong answer. In an ideal world there would be a perfect pyramid of management information (MI) with just the right amount flowing up to the ExCo, the board committees and then the board itself.
The quantity and quality – and also the timeliness – of MI and other material to the board is very much something the NEDs should challenge. Too much information is very difficult to process and will not lead to a good board or committee discussion. Too little has its own risks. Investing the time to understand the business and build relationships helps NEDs validate the information they receive.
I find being a NED is great fun and rewarding. I enjoy the variety of the work and meeting a wide range of new people. But I finish on one word of caution: it is crucial to be extremely well organised as, unless you choose to employ one privately, there is no PA nor is there an IT department!
Rosemary is an independent non-executive director on the boards of Vitality Life and Vitality Health; Willis - the global wholesale insurance broker; Record plc – a currency manager; and the Pension Protection Fund. For Willis she chairs the Audit Committee and for Vitality the Risk Committee. The PPF and Record have combined Risk and Audit Committees which Rosemary chairs. She is also a member of the MBA Advisory Board at Cass Business School and a 30% Club mentor. She was a trustee of the national homelessness charity Shelter for six years until 2016.
Rosemary’s last executive role was at TSB Bank where she was the Chief Audit Officer. Prior to that she was at the Financial Services Authority and before that the Bank of England. She held a number of senior supervisory roles and worked closely with the FSA board.
Rosemary qualified as a certified accountant and has a first class honours degree from Manchester University, where she studied Pure Mathematics and European Studies.