Working as a subsidiary board: Checklist

Working as a subsidiary board: Checklist

The Board of a regulated subsidiary has always been a tricky place to be. Directors need to balance group demands with local legal and regulatory requirements and requests, and often through the lens of a complex matrix where accountabilities are less than clear.

The COVID-19 crisis is likely to be putting your subsidiary governance to the test. The critical implications of the crisis will differ amongst companies in the same group and each should have a tailored plan to deal with the crisis.

Here is a checklist of the things your subsidiary board should be addressing in view of the crisis to make sure you remain effective:

Information and policies

  • Can we still access relevant and reliable Group information?
  • Are we getting the information we need on the impact of the crisis on our legal entity?
  • Are we providing Group with the local information they need?
  • Are Group policies giving us the flexibility to deal with the crisis in the way we think is right for each entity (e.g. remuneration, capital retention, risk management)?
  • Do we know what the Group expects of our local board in handling the crisis?
  • Dividend and capital maintenance
  • Does our dividend upstreaming take account of local operational needs based on our assumptions and stress scenarios?
  • Have we properly considered all relevant stakeholders in our dividend decision?
  • Have we taken adequate account of our directors’ duties, in particular the need to pay debts when they fall due at local level?
  • Have regulatory capital requirements or expectations for our local entity changed?

The local risk and control environment

  • How have the disruption and changes to working practices impacted our control environment?
  • How far do we need to adjust forms of risk management control to mitigate these impacts?
  • What is the impact on our local internal audit plan and our ability to carry out audits?
  • How is our reliance on material outsourcing arrangements within the Group affected?
  • Are we kept informed about new or increased risks at Group level that could affect us?
  • Have local crisis-related risk assumptions and scenarios been shared with Group?
  • Should we revise our local contingency planning in view of a second wave and the continuing effects?
  • Should we perform or update our reverse stress test at local level?
  • Does the Group risk appetite and stress testing take account of our local circumstances?

People and Culture

  • How are we keeping an eye on the wellbeing of our local team?
  • Are we clear on Group’s “people response” (including return to work strategy) and how that affects our people locally?
  • How are the behaviours towards key stakeholders – customers, suppliers, supervisors – affected?
  • Is our customer response in line with our conduct standards and the regulatory expectations?
  • …..and it is always worth checking the basics again…..

Role and composition of the subsidiary board

  • Do we have a statement on the role of the subsidiary board, communicated clearly and understood consistently in the Group?
  • Is there specific guidance from Group on the level of autonomy and flexibility granted to the subsidiary board? Is that still relevant in the crisis?
  • Are we clear on when we need to escalate from the local board to Group, and on their obligation to respond?
  • Do we have the right mix of Group and non-Group directors?
  • Do we have the expertise we need around the board table for the current circumstances?


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