Reviewing and Approving Annual Budgets

Item: Proposed annual budget with projections, expenses, and capital expenditures.

Task: Assess if the budget supports strategic priorities (e.g., expansion, R&D).

Ask: Are revenue assumptions realistic? Is there sufficient investment in key areas?

Example: A director questions a 20% marketing spend increase, asking if it aligns with market trends and expected ROI.

Evaluating Major Investments

Item: Proposal for a R10M factory expansion, with NPV and payback calculations.

Task: Understand key metrics (NPV, IRR) and assess risks (market demand, cost overruns).

Ask: What are the financial/non-financial benefits? What are the contingency plans?

Example: A nonprofit board reviews building a new centre, weighing donor funding against long-term maintenance costs.

Approving Mergers or Acquisitions

Item: Due diligence report for acquiring a competitor, including valuation and financing.

Task: Evaluate the financial rationale (cost savings, market share) and risks (integration costs, cultural fit).

Ask: Does the deal create long-term value? Can we afford the debt?

Example: Directors question a startup’s valuation based on its projected cash flows.

Assessing Funding Strategies

Item: Proposal to raise capital through equity or a bank loan.

Task: Compare costs of capital (dilution vs. interest) and impact on financial stability.

Ask: How will this affect our balance sheet? Are there alternative funding options?

Example: A board evaluates a loan for automation, probing repayment terms and cash flow impact.

Analysing Financial Reports

Item: Quarterly statements showing a decline in gross margin.

Task: Identify trends using ratios (e.g., gross margin %).

Ask: Why is profitability dropping? Is this a one-off or a systemic issue?

Example: A healthcare board notices a cash flow shortfall and questions if delayed insurance reimbursements are the cause.

Reviewing Variance Reports

Item: Report showing actual expenses 15% above budget in Q2.

Task: Understand reasons for variances and assess management’s corrective actions.

Ask: What steps are being taken to control costs? Are these variances justified?

Example: A university board reviews overspending on facilities and debates reallocating funds.

Engaging with External Auditors

Item: Audit report flagging weaknesses in internal controls over procurement.

Task: Discuss findings with auditors, focusing on risks and remediation plans.

Ask: How serious is this issue? What is management doing to address it?

Example: A charity board learns of expense reporting discrepancies and pushes for stronger policies.

Assessing Financial Risks

Item: Risk register highlighting currency fluctuations as a major threat.

Task: Evaluate the financial impact (e.g., on export revenues) and review hedging strategies.

Ask: Are we adequately protected? What’s the cost of mitigation?

Example: An agribusiness board discusses exposure to commodity price volatility.

Approving Dividend Policies

Item: Proposal to increase dividends by 10%.

Task: Balance shareholder expectations with cash reserves and reinvestment needs.

Ask: Can we sustain this payout? Does it limit growth opportunities?

Example: A utility board debates dividends vs. infrastructure upgrades, prioritising long-term reliability.

Reviewing Cost-Cutting Proposals

Item: Plan to reduce headcount by 5%.

Task: Assess financial savings against non-financial impacts (morale, brand reputation).

Ask: Are there alternatives? What’s the long-term impact?

Example: A retail board evaluates store closures, weighing cost savings against market presence.

Evaluating ESG Investments

Item: R2M proposal for solar panels.

Task: Analyse financial returns (energy savings, tax incentives) alongside ESG benefits.

Ask: How does this align with stakeholder expectations? What’s the payback period?

Example: A board approves green initiatives but requests a clearer ROI timeline.

Scrutinising Executive Compensation

Item: Proposal for a CEO bonus tied to financial performance metrics.

Task: Ensure bonuses align with long-term value creation, not short-term gains.

Ask: Are the metrics (e.g., EPS, revenue) appropriate? Is the package competitive?

Example: A board revises bonus criteria to include customer retention, not just profit.

Approving Financial Statements

Item: Annual financial statements for shareholder approval.

Task: Confirm statements are accurate, compliant (e.g., IFRS), and fairly represent performance.

Ask: Have all material risks been disclosed? Are we confident in the audit?

Example: A board signs off on accounts after clarifying a large provision for litigation.

Ensuring Regulatory Compliance

Item: Regulatory notice requiring enhanced financial disclosures.

Task: Understand compliance implications (costs, reporting) and ensure adherence.

Ask: Are we meeting all legal requirements? What support does management need?

Example: A financial services board oversees compliance with new anti-money laundering rules.

Addressing Fraud or Ethical Concerns

Item: Whistleblower report alleging inflated revenue figures.

Task: Support an independent investigation, review controls, and ensure transparency.

Ask: How did this occur? What safeguards are now in place?

Example: A nonprofit board investigates misused donor funds, strengthening expense approval processes.

Setting Financial Policies

Item: Proposed policy on debt limits (e.G., debt-to-equity ratio < 1).

Task: Evaluate the policy’s impact on financial flexibility and risk.

Ask: Does this align with industry norms? Will it constrain growth?

Example: A construction firm’s board sets a conservative debt policy to maintain credit ratings.