WHO IS ACOMPANY

SECRETARY?WHAT DO THEY DO?

SLID CONTINUESENHANCING THE

SKILLS OF BOARDDIRECTORS

NAVIGATING THENEW FRONTIER:DIRECTORS IN

THE DIGITAL AGE

VOLUME 19 ISSUE 01

SLID PRESS RELEASE

CONTENTS04

SLID CONTINUES ENHANCING THE SKILLS OFBOARD DIRECTORS

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INED FORUM KEY LEARNINGS07

SLID TAKES THE MESSAGE OF GOVERNANCE TOANURADHAPURA

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SLID ASKS THE QUESTION IS YOUR BOARD OFDIRECTORS READY TO LEAD INTO THE DIGITAL AGE?

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KPMG HOSTS THE 18TH AUDIT COMMITTEE FORUM16

SLID, IFC AND CSE RING THE BELL FOR GENDEREQUALITY IN 2019

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SLID AND CIMA PRESENT THE ‘FUTURE OF FINANCE’AN EXCLUSIVE EVENT FOR SLID MEMBERS

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CONVERGENCE OF RISK MANAGEMENT ANDGOVERNANCE

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THE ICLIF LEADERSHIP AND GOVERNANCE CENTRE20

NEWS FROM THE SECRETARIAT

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ASK THE SLID GURU

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NEW MEMBERS

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WHO IS A COMPANY SECRETARY? WHAT DO THEY DO?

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OFFICE BEARERSAND COUNCIL

SLID OFFICENo. 434, R. A. De Mel Mawatha,Colombo 03

Telephone: 2301646 - 8

EDITOR: Rasakantha RasiahPRINTED BY: Sanvin (Pvt) Ltd.ART DIRECTOR: Dharshan Senanayake

Email: iod@slid.lk. info@slid.lk

Web: www.slid.lk

Chairman

Senior Vice Chairman

Vice Chairman

Immediate Past Chairperson

Council

CEO SLID

Past Chairmen

1 Mr. Preethi Jayawardena

2 Mr. Rasakantha Rasiah

3 Mr. Faizal Salieh

4 Ms. Shiromal Cooray

6 Mr. Dinesh Weerakkody7 Mr. Prakash Schaffter

5 Ms. Aroshi Nanayakkara

8 Mr. Vish Govindasamy9 Mr. Dilshan Rodrigo10 Ms. Nadija Tambiah11 Dr.(Ms) Roshan Perera

12 Ms. Chamindã de Silva

Desh. Ken Balendra - Founder President (2000 - 02)

Mr. Ronnie Peiris - President/Chairman (2011-13)Mr. Pravir Samarasinghe - Chairman (2013-15)Ms. Shiromal Cooray - Chairperson (2015-17)

Mr. Richard Juriansz - President (2004 - 07)Ms. Marina Tharmaratnam - President (2007 - 09)Mr. Mahen Dayananda - President (2009 - 11)

Mr. Ranjit Fernando - President (2002 - 04)

COLOMBO (07 March 2019) The Sri Lanka Institute of Directors together with the Securities and Exchange Commission of Sri Lanka were instrumental in furthering the empowerment of women by introducing progressive quotas for women on Boards of Public Limited Companies. This pioneering initiative has been included in the policy documents and was present-ed by the Hon. Minister of Finance at the budget reading on Tuesday, 5 March 2019 paving the way for more inclusivity of women in the highest echelons of Corporate Management.

We take this opportunity to thank the SEC and Mr. Ranel T. Wijesinha, Chairman of the SEC, for the support and guidance given in bringing this initiative to fruition.

The proposal for progressive quotas is as follows:1. SEC to introduce a voluntary target of 30% of women in director Boards of companies listed on the CSE. All listed companies shall disclose the percentage of women on their Boards in their Annual Report.

2. By 31 December 2020 all listed companies that are unable to meet the 30% voluntary target will be required to disclose reasons for being unable to do so.

3. By 31 December 2022 all listed companies shall have at least 20% of Board seats occupied by women.

4. By 31 December 2024 all listed companies shall have at least 30% of Board seats occupied by women.

SLID, a key proponent of Corporate Governance in Sri Lanka’s Corporate sector, strongly believes that gender diversity is essential for a high-performing and talent-led organization. We believe that enabling the potential of women is central to ensuring sustainable and inclusive development, both in business and in the community. Empirical evidence is cited from a recent study by IFC (Member of the World Bank Group) of the 30 largest companies in Sri Lanka from 2015 to 2017 which indicates that on average, companies with higher Board gender diversity exhibit better financial indicators, in terms of ROE, ROTA and PE ratios, than those with lower or no gender diversity on their Boards.

SLID is keen to take a ‘hands on’ approach and is ready to assist companies in training their female leaders to be Board ready as well as in sourcing suitable women for Corporate Boards. In addition, SLID will be launching the Women Directors Forum during the month of April 2019, another pioneering initiative supporting women on Corporate Boards by enhancing their knowledge as well as bringing them together for discussion and networking.

SLID has a Women on Boards programme that mentors and trains women in corporate management and is building a directory of Board ready females with the collaboration of other key stakeholders. We encourage Corporate entities as well as interested women to contact Ms. Chamindā de Silva, CEO, SLID (0112301647) for further information on any of these initiatives.

PRESS RELEASE

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SLID CONTINUES ENHANCING THE SKILLS OF BOARD DIRECTORSRecent surveys indicate that a Com-pany’s ability to attract capital at a favourable cost is a direct factor of the standard of the Corporate Gover-nance employed, and exhibited, by it. There is a growing impetus to improve standards of individual directors and boardroom performance through education, certification and evaluation. The need for good corporate gover-nance and board room practices have never been so pertinent and important in Sri Lanka with increased expecta-tions and responsibilities being placed on directors whilst key stakeholders keenly observe director behaviour and performance as a matter of right.

The Sri Lanka Institute of Directors (SLID), the trailblazer on board gover-nance, certified 30 participants from the 7th and 8th Intake who completed all 4 parts of the flagship Board Lead-ership Director Certification Programme (BLT) at a recently held event at the Cinnamon Grand Hotel. Of the 30 certificates awarded, 20 SLID ordinary members are now eligible to use the post nominal GSLID.

The names of those who completed will be added onto SLID’s list of poten-tial Independent Directors and shared if they meet the relevant search criteria of companies. This is the only list in Sri Lanka which includes names of people who have completed a director certifi-cation programme which is accredited by the Securities and Exchange Com-mission of Sri Lanka (SEC).

SLID’s flagship Board Leadership Director Certification Programme (BLT) was developed as an interna-tional class Training Resource Kit by SLID through material developed by the International Finance Corporation through its Global Corporate Gover-nance Forum. The programme is accredited by the SEC and extensive-ly customized by SLID to meet Sri Lankan requirements and aligned to the Company’s Act, the requirements of the Colombo Stock Exchange, the rules and regulations of the SEC and the best practices of the Corporate

Governance code. The BLT programme is unique as it includes a combination of facilitated classroom sessions, real-world case discussion and small group exercises that encourage participants to think strate-gically and drive tangible improve-ments in performance at an individual, board and organisational level.

The SLID faculty comprises of senior directors and knowledge experts, who have the knowledge base, experience and skills to lead director education programmes. They enrich the programme by sharing their practical experience and real-life examples which cannot be obtained from textbooks. This is validated by the rating the programme has received since its start where over 95 per cent of participants have rated the programme 4 and above (where 1 is the lowest and 5 the highest in the rating scale). Included in the SLID faculty are certified IFC Corporate Governance Board Leadership trainers.

Preethi Jayawardena, SLID Chairman welcomed the participants and congratulated them on now being equipped to being more effective directors. He spoke on SLIDs history and the journey to date whilst sharing SLID’s future plans to continue build-ing better Boards in Sri Lanka. In his introduction of the Chief Guest of the evening, Ronnie Peiris, he stated that Ronnie was the pioneer of this programme and was the person instrumental in making it a reality.

Ronnie Peiris, spoke on the attributes and behaviours he thinks a director should have. He stated that it is in the practice, and execution, of gover-nance that we tend to fall short. Being a Board director is not an easy job. Some people think that it is presti-gious for others it is something to do at retirement and for some others it is a way of earning extra money. How-ever, to be a good and effective Board director there are some things that you have to do beyond the norm. The first is, commitment. It is not a once a

quarter job. It needs time and prepara-tion. To be effective you need to go beyond that. Be prepared to serve your Board. Your role is not just for the purpose of sitting on the Board. You are the ambassador for the Company. If you are not committed it will soon become apparent.

The second is to be prepared. How-ever clever or brilliant you think you are there is no substitution for being prepared. It may be fashionable to say “I did it off the cuff” but when you are 100 per cent prepared for the Board meeting you will be able to add value to discussions and you will realise that the you will be respected by your fellow members and be influential in the final decision.

The third attribute is to have equanimity. Equanimity means staying calm and composed in a difficult situation when others around are belligerent and losing their cool. You must also learn to listen. The Boardrooms are like kegs of dyna-mite waiting to blow up. If the Board is doing their job there must not be automatic agreement, but there must be constructive debate and discussion. There will be different points of view and you must be able to articulate your point of view in a coherent and calm manner.

The fourth is emotional intelligence. He recommended Daniel Goleman’s book on emotional intelligence as it gives you a very good idea what it is. Being aware of emotional intelligence you will not only know yourself better but you will also learn on how to connect with your fellow directors as well as with senior management.

The next attribute is to keep an open mind. He referred to a recent presen-tation he had attended on Mind Educa-tion where the presenter attributes South Korea’s economic success to keeping an open mind. They have been able to increase their per capita income significantly from the lows after the Korean War because they had an open mind, no vested interest or agenda, or pre-conceived ideas. They

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listened to the ideas of others. If you don’t keep an open mind you can never develop yourself.

He went on to say that these were some of the key traits he feels helped him as a Board director and encour-aged everyone to reflect on the attributes that he discussed today.

Going further, he stated that we must learn to be dispassionately passion-ate. We all have things we firmly believe in but at the Board we must not allow this to over shadow the thoughts and opinions of others. We must be passionate on what we are doing but we must be dispassionate to the extent to keeping an open mind and listening to others. He went on to say that passion is a key Boardroom success but being able to stay dispas-sionate is the important ingredient.

The next and most important attribute is to be brave and coura-geous. Soon after the Yahapalanaya Government came into power in 2015 he was on a panel discussing Bribery and Corruption. His first question had been;- ‘where were the professionals? If the professionals in our country were doing their job in accordance with the profession’s code of conduct, how could bribery and corruption be allowed to take place?’ He wrote a book titled ‘Tough Journey, Great Destination’ as he felt the value system and professional-ism in our Boards and Corporates were eroding by the day. He asked everyone to reflect on whether if we were doing our job in a professional manner would we have allowed for these illegal and unethical behaviour to happen? He advised that we should forget politics and have the confidence in one’s own ability and thereby if someone wants you to do the wrong thing you can decline and if you must, find another job. If that place also wants you to do the wrong thing …… then find another job. There must be some place in the corporate world that allows you to do the right thing. Don’t come up with excuses that you have to feed your children; I must earn money et cetera. If we take that route this

country will never change. He went on to say that he thinks its time that we all stood up for the right thing. He said he was not talking about politics as he felt that as far as he is concerned everyone in the political world has let him down very badly. We don’t have selfless leaders. As new directors lead the charge;- show your professionalism;- show it in your selflessness. This has to start at Board level and at a Leadership level. The most difficult part is everyone is looking for favours. Nepotism is rife.. Everything must be on merit.

The next attribute is saying no. As a Board director you must learn to say no if you believe it is the right answer even if everyone else around you is saying yes. You must make your voice heard. Sri Lankan culture is that we defer to a senior. But in the Boardroom, you have the right to voice your opinion. You must not stop yourself from doing this. If you are in the First Eleven behave that way. There is a provision in the Companies Act that allows for a director’s dissent to be minuted.

The final attribute is to be mindful of the context. Don’t look at a decision on a standalone basis but also consider the impact on others. Everything is connect-ed, so any decision you make in the Boardroom will have far reaching conse-quences.

Ronnie Peiris’s encouraging words were followed by the awarding of the certifi-cates by him, and the Chairman Preethi Jayawardena.

The following SLID ordinary members of intake 7 and 8 who have completed all four parts of the programme and now eligible to use the post nominal GSLID,

Ananda Atukorala Dilshan PereraShums Cassim Gihan PereraU N Dissanayake Indiramli PereraNishan Fernando Pathmanatha PoddiwalaShanasz Hakeem Athula SamarasingheH P J Hewawasam Kaneshamoorthy SelvapalanTarindra Kaluperuma Justice K SripavanHarsha Kariyakarawana K Thantrige SupeshalaRanganath Kirindage Sithambaranathaiyer VageeswaranSanath Manatunge Dr. Charitha Wijesiriwardana

The following successfully completed all four parts of the programme,

Chinthaka Dharmasena Kapila HettihamuChathurika Ekanayake Vigneswaran MahathevanCanisius Fernando Sisira SenarathneJanaka Fernando Dhakshitha SerasundaraGayan Gunawardana Theja Silva

Keeping in line with SLIDs view that time is of value the formalities were kept to a minimum with more time for fellowship. We wish the new graduates all the best and look forward to seeing them being more effective directors in the future! The next Intake commences in February 2019. For more information about the programme contact Nicholas on 2301646.

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The Chairman is responsible for leadership of the Board and is crucial for creating the culture imperative for individual director participation and overall Board effectiveness.

The Chairman’s role in facilitating independence in the Boardroom was discussed at a recent session of the Sri Lanka Institute of Directors (SLID) Independent Directors (INED) Forum held at the Securities and Exchange Commission (SEC) Auditorium. The session was chaired by Faizal Salieh, SLID’s Vice Chairman, with Dr. Harsha Cabral (PC), Independent Non-Executive Chairman, Tokyo Cement (Lanka) PLC, Kumar Jaya-suriya, Independent Non-Executive Chairman, Central Finance PLC and Sunil Wijesinha, Independent Non-Executive Chairman, United Motors PLC as the key panel speak-ers, and Arittha Wikramanayake, Precedent Partner, Nithya Partners, and Manil Jayesinghe, Partner Ernst & Young as discussants.

Dr. Cabral started the session by saying that the concept of an indepen-dent non-executive (INED) director did not arise from company law but through the listing rules. In the eyes of the law there was no distinction between an executive, non-executive or indepen-dent director– they were all equal. To date the Law Courts in Sri Lanka have not looked at INEDs differently from the other directors on the Board.

WHY INEDS? Anyone can be a director; there is no qualification required. Dr Cabral said INEDs should infuse stature, integri-ty, experience and knowledge into the Boardroom. An INED when appointed must serve the best inter-ests of the company and not the interests of persons responsible in appointing him or her.

There are two jurisdictions where it is

mandatory by law to have INEDs- China and India. In China the majority shareholder does not vote in the appointment of INEDs and in India the INED must be chosen from a list established by the government.

The Chairman must ensure INEDs are allowed to be independent. Once appointed the Chairman and Board must listen to their views and take them seriously. He underscored the importance of appointing the right people as INEDs.

ASK NAÏVE QUESTIONSSunil Wijesinha, sharing his own experiences, stressed that when nominating suitable candidates as INEDs it was necessary to choose people with integrity, having specific and general skills. He believed they need not have intimate knowledge of the industry concerned but should become familiar with the operating conditions of the company and indus-try. He as chairman encouraged naïve questions, which often turned out to be good questions. When newly appointed, he as Chairman ensured that the INEDs were given an induction to provide basic knowl-edge of the company and industry.

SEATING AT BOARD MEETINGS CAN BE INTIMIDATINGWijesinha said that at Board meet-ings INEDs should sit close to the Chairman. Otherwise directors tend to have fixed places of seating at the Boardroom and a new INED may sit a distance away and feel intimidated and inhibit contributions.

COMPANY STATURE IMPORTANT TO ATTRACT THE RIGHT INEDS“Two hands are required to clap” quipped Kumar Jayasuriya. The company should be well run, adher-ing to principals of good governance and ethical, and the Chairman should ensure the company has the

stature to attract persons who can be fiercely independent and challenge views expressed by major shareholders.

COMPANIES ACT REQUIRES ALL DIRECTORS TO BE INDEPENDENTArittha Wikramanayake commented the Companies Act requires everyone appointed to the Board to work in the best interests of the company, act honestly and in good faith. In practice, though, it is very difficult for Executive Directors to be independent. He said most INEDs fit the selection criteria but do not act independently; this may be due to the Board chair having a say in the selection process.

The INED should not depend too much on his emoluments from the company, as this will inhibit his ability to speak out independently.

CULTURALLY ACCEPTABLE TO NOT VOICE YOUR OPINIONIt is typical Sri Lankan culture to listen to ‘elders’ and not question them, something that seems to also prevail in the Boardroom. This must be addressed squarely as all directors stand equal on the Board. The Chair-man should unleash the potential of an INED and enable him or her to speak out and contribute to produc-tive discussion. Independence does not mean objecting to everything, but healthy debate of pros and cons to make good commercial decisions in the best interest of the company. The success of the Board in this respect lies with the Chairman.

CHAIRMAN IS THE CONDUCTOR OF AN ORCHESTRA Manil Jayesinghe said the Chairman is like the conductor of an orchestra. Effectiveness of the Board meeting depends on the Chairman. The Chairman must ensure discussion is kept relevant and focussed; he must solicit different views so the Board reaches an educated conclusion.

THE CHAIR’S ROLE ISCRUCIAL FOR INDEPENDENCEIN THE BOARDROOM

INEDForum

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Setting the agenda for meetings and sequencing agenda items is an important responsibility of the Chair-man and the Company Secretary. Meticulous planning can make a meeting most productive.

Jayesinghe commented that com-pensation influences the behaviour and decisions of directors. He suggested that when potential INEDs are identified, the focus should be on people who value and safeguard their own integrity and reputation.

OVERSIGHT VS. EXECUTIONThe Board’s role is oversight whilst the Executive Directors’ and Man-agement’s responsibility is execution of the strategy. The Chairman should solicit INEDs’s views and not allow biased views from Executive Direc-tors to dominate discussions.

BACK CHANNEL OR OFFLINE DISCUSSIONSDuring the discussion a participant shared his experience where the Chairman and other directors had not considered his views as an INED at the board meeting but commend-ed him offline after the meeting. He asked against this backdrop what should an INED do?

Dr. Cabral felt the approach depend-ed on the Chairman, who might consult INEDs prior to the meeting on a particular subject and obtain their views, and then play a balanc-ing act at the meeting.

If the INED feels his voice is not heard or his independence is disre-garded, it may be time to consider exiting from the Board.

Sunil Wijesinha said the use of offline discussions occurred in prac-tice. He was once Chairman of a family owned company where decisions were usually made at family gatherings and later ratified at Board meetings! He said an INED should not be reluctant to speak up. As Chairman he would have prior discussions with the INED giving him or her the background to an issue

and prepare him for the meeting at which it is taken up for discussion.

Kumar Jayasuriya said if it was an important issue he did not encour-age back channel communication. If there was such communication, he would call for another meeting to discuss the issue in question again and reach agreement.

AN OPPOSING ARGUMENT IS NOT A PERSONAL ATTACK Arittha Wikramanayake commenting on a cultural factor said unlike lawyers, who though they are oppo-nents in court leave court as friends, opposition in the Boardroom may be taken personally. The Chairman must make it clear that a contrary view expressed is not a personal attack and should not be taken as such.

Faizal Salieh said whether it is offline (via back channels) or online, the Board Chair was responsible to balance out discussion. An open and transparent Boardroom culture would use more online and minimal offline discussions. There are times when offline pre-Board meeting engagements help clarify and refine the focus on Board agenda matters more productively during the Board meetings.

WHAT SHOULD AN INED DO IF THE CHAIR DOES NOT FACILITATE INDEPENDENCE?A participant questioned how an INED should handle a situation where the Chairman does not facilitate indepen-dence.Much depends on the courage and independence of the INED. If there are other INEDs they could meet separately and discuss how meetings can be more effective and governance improved in the Board-room. Back channel discussions may need to be conducted before Board meetings; INEDs having one voice at the meeting may help. The Chairman must understand issues and concerns and take note of them. Having discus-sion after Board meetings may be generally unproductive.

The corporate governance code brings in the concept of a Senior INED when the Chairman himself is not an

independent director. The person should be senior and strong-willed enough to contest the Chairman. In practice this may not be the case.

Views expressed at Board meeting must be minuted. The Chairman must make sure the minutes capture all views expressed.

As regards the question where an INED is on-boarded because he is a “subject matter expert”, how does the Chair facilitate independence, the Forum observed that a director is required to have reasonable knowl-edge and is not expected to be an expert on all matters discussed. Directors and the Board may seek professional third party advice from subject matter specialists when required. Nevertheless, all INEDs must develop the ability to grasp the matters before the Board in order to contribute constructively to the Boardroom discussion.

KNOW YOUR FELLOW DIRECTORS The Chairman should know every Board member. He should engage with directors and to some degree encourage social interaction outside the Boardroom. He should be cautious, though, that this could be perceived as eroding independence!

HOW DO YOU FACILITATE INDE-PENDENCE IF THE CHAIRMAN WAS ALSO THE CEO?Ensure INEDs are a majority on the Board and have the stature to ensure decisions were made after discus-sion, with all views heard in the Boardroom. The role of the Chairman is the very important one of chairing and guiding Board meetings and shareholder meetings.

SHOULD THE CHAIRMAN AND CEO BE ONE PERSON?SEC Chairman Ranel T Wijesinha shared some views on what was discussed, and in closing asked the SLID and those present at the INED Forum to discuss and comment on the separation of the role of Chairman and CEO.

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of the evening. He also said that Sri Lanka needs more development banks to spur the growth of local businesses, particularly the SME sector development activities. The SME's are considered the backbone of our economy and it accounts for almost 65% of our local businesses and they play a significant role in income distribution and regional development. The keynote address was delivered by Prof. Rohan Sama-rajiva, Chairman ICTA who spoke on ‘Boards in the digital age’.

THE BOARD NOW FACES A WORLD OF GREATER UNCERTAINTYRohan commented that the Board should direct the company and assist to respond to external forces. He said that the challenge a board faces is a world of greater uncertainty caused by the faster pace of change and the broadened scope of what is relevant.

TIPS TO DIRECTORS TO NAVIGATE THROUGH THIS ERAIn conclusion he shared three key points a director can do to navigate through this era of plentiful informa-tion where attention is a scarce com-modity. The first is to find relevant and high-quality information. He shared how he uses Twitter as a news filter where if something looks interesting he will then get more information about it. He also suggest-ed understanding what assistants can do for you and the things that you have to do yourself.

The second, is to encourage provi-sion of decision-assisting tools such as analytics for anomaly detection and visualizations. But he warned to keep in mind that visualizations can hide as well as illuminate. The third and last was to engage in networking with people from different back-grounds, expertise and knowledge. It is not what you know, but who you know: Just-in-time, pre-processed information. His parting advise was

SLID ASKS THE QUESTION IS YOUR BOARD OF DIRECTORSREADY TO LEAD INTO THE DIGITAL AGE?

The digital age is well and truly upon us, big data, cloud computing, mobile commerce, smartphone penetration and the explosion of social media and its multitude of platforms mean that the leaders of organisations, whether in the public or private sectors, big or small, must ensure their organisations remain relevant, sustainable and in the best position to deliver their mission and achieve their long term goals.

Boards can’t allow their companies to fail due to lack of failing to keep up with today’s digital age. They should decisively lead the company into the digital age, to be a creator of change and not be fearful of it. Whilst denial may create a warm and safe place, it is artificial and contribute to failure. Acknowledging that the core compo-nents of communication used 10 years ago are no longer relevant today is a good place to start.

DOING NOTHING IS NOT AN OPTION!Doing nothing to embrace the digital age is not an option, unless your strategy is to become obsolete in a short period of time. Fundamentally, the principles haven’t changed over time – business is still trying to

provide a service/product that is valued by its customers and at a competitive price that is affordable to their client base and profitable to the organisation. The only difference is how this is delivered, and the digital age is the next evolution of the business model. The board has a role to play in recognising the impor-tance of this new digital era and its inclusion in the organisation’ s opera-tional framework, even if, in the first instance, it has no idea what it all means!

The Sri Lanka Institute of Directors (SLID) as part of its knowledge shar-ing Power Evenings series recently discussed the Board’s role in driving digital transformation asking the question ‘Does your current Board of Directors have the sort of digital literacy required to consider the impact that technologies such as artificial intelligence, data analytics, or the Internet of things will have on their company and industry?’

The evening session commenced with Preethi Jayawardena, SLID Chairman welcoming the participants with a brief introduction to SLID followed with a synopsis of the topic

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not to surround yourself with people like you and to avoid the ‘echo chamber’.

The panel discussion was moderat-ed by Ruwindhu Pieris, Managing Director, Stax Inc. and head of Colombo Office. The panel com-prised of Lakmini Wijesundere, Co-Founder, CEO IronOne Technol-ogies/BoardPAC, Kapila Sri Chan-drasekera, Director ICTA and Ransith Fernando, Co-Founder/Di-rector Forestpin.

MAJORITY OF BOARDS ACROSS COUNTRIES FACE THE SAME ISSUE Ruwindhu commenced the discus-sion by asking Lakmini what her observation has been on the current understanding of Boards of this issue. She shared that, from the perspective of BoardPAC where they meet Boards of Directors in Sri Lanka as well as from different coun-tries, the experience surprisingly has been the same. Although the compa-ny has moved to digitization and digitalization the senior directors have a traditional outlook and don’t have the required awareness, they completely embraced it themselves.

TECHNOLOGY CAN BE USED TO INCREASE EFFICIENCY Kapila shared how he uses technolo-gy to serve on a Board of Directors outside Sri Lanka. The documents for the Board meeting are available online on a system similar to Board-PAC and he uses conferencing facili-ties to attend the monthly meetings. He only attends the AGM once a year. He also overlooks the finan-cials which is also online where he has the necessary tools via technol-ogy to drill down and ask the relevant questions.

Ruwindhu referred to an article that was published in the last SLID mag-azine the Director by Faizal Salieh who states that it is the responsibility of the Board to ensure that you are not getting disrupted, and also look inside and direct and assist people to use technology to increase efficiency. He asked the question how can constitutional boards have that visibility?

DIGITIZATION VS. DIGITALIZATIONRohan explained that there is a differ-ence between digitalisation and digiti-zation of papers. The issue of how companies go for digitalisation depends on two things. The first is what are the external competitive pressures faced? You may not know where the pressure is coming from, but it is when you get that external pressure that your behaviour starts changing. For example, a company like PickMe which is continuously under pressure, especially from Uber and other apps coming into the market has no alternative but to keep innovating and looking at new ways of doing things. However, there are many sectors in Sri Lanka that are complacent where they are. They have cosy little clubs where they don’t attack each other so they don’t face any competitive pressure. Rohan was of the view that it is when both the internal angle and external pressure come together that you will see change happening.

NECESSITY DRIVES BOARDS TO EMBRACE DIGITIZATIONIts necessity that drives companies and Boards to embrace digitization. As an example, Rohan shared his experi-ence at ICTA. When it was established in 2003 it had outsourced many functions, had open plan offices and for a government institution was ahead of the curve. It was complacent and for 14 years it had been like this and had gone stale. When he took over as Chairman, one of the prob-lems was that there were two locations and people in each location thought that the people in the other location did not work! He requested the CEO to do something about. The CEO was also under pressure to reduce cost. He came up with the idea of hot desking and managed to get rid of one location. Hot desking means that you don’t have a desk allocated to you but when you come in you can login to the system and find a suitable desk. You need a layer of technology to run this.

DATA ANALYTICS CAN ASSIST BOARDS IN RISK MANAGEMENTRansith shared his insights from what Forestpin, a data analytical system,

has given to Boards. As Rohan stated in his key note presentation there is an information overload which is vying for your attention. The data analytics allows for focus on risks that matters at an operational and Board level. For the Board it assists in risk manage-ment and the prevention of fraud.

COST OF TECHNOLOGY IS HIGH. WHERE SHOULD THE BOARD DRAW THE LINE?A question was raised by Preethi Jayawardena that the cost of technol-ogy is quite high where should the Board draw the line? Rohan pointed out that in his example of ICTA introducing hot desking was about saving and not spending. The CEO was driven by the need to reduce cost whilst as the Chairman his focus was looking at the big picture of a healthier organisational culture. They saved money by getting rid of the second location. If they had kept the second location but used a layer of technolo-gy now there would be an additional cost without a saving.

IT WAS NOT ABOUT FIRING PEOPLE BUT REALLOCATING RESOURCES AND SAVING MONEY.He also cited Banks in the US, which is a highly competitive environment, when they consider installing ATMs they also looked at reducing costs by getting rid of the need for branches and front line staff. There would be an extra expense on the equipment, security and rent but there also would be saving on other expenses. He shared that his problem with the Government, who was his primary client, was that they were only looking at adding things without cutting down something else. He would like to reduce the number of people standing in line at counters and coming in, he would like to encourage people to go on line and pay their rates etc. and for the Municipalities to save money. He also requested the private sector to also look at this. It was not about firing people but reallocating resources and saving money. An advised Board Directors to look at ways of using technology to become more efficient which will be also reflected in a better bottom line.

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DON’T LOOK FOR OLD TERM SOLUTIONS FOR A NEW BUSINESS MODELKapila commented that he was from the Telecom industry where the cost of new technology was prohibitive. The problem was that we are looking at old term solutions for a new business model. Rohan added that changing the way things are done using technol-ogy is digitization and the way industry functions have transformed using technology is digitalization.

Ruwindhu summarised the discus-sion on cost of technology. The take-away was that there is going to be re-allocation of resource. There were certain investments that need to be taken in technology at face value is expensive, but Boards should look at the broader picture of whether you are leverage on technol-ogy across the rest of the organisa-tion to unlock potential. Digitization and digitalization have allowed organisations to reallocate and re-harvest resources to areas that need to be allocated.

IT’S OK NOT TO KNOWAs a first step towards embracing digitalisation Directors must be willing to admit that they don’t know – espe-cially on cybersecurity and technolo-gy. It is in our culture to pretend that we know when we actually don’t. Must start by admitting that I don’t know it, but I am willing to find out by asking. Boards need to change their mindset!

The business models are being changed, your friends are now your competitors and your competitors now your friends. Board need to have the ability to grapple with this fast-chang-ing environment and make sense of it and adapt your company to all this.

DIGITIZATION OR DIGITALIZATION IS NOT TECHNOLOGY BUT BUSI-NESS MODEL CHANGEKapila commented that when we hear the word digitization and digitalization we always think of technology and that is where we go wrong. The person who predicted the digital world in 1976 was a sociologist named Alvin Toffler! He was of the view that we

must move away from thinking that Digitization/ Digitalization is technolo-gy. Its about business model change, thinking change. People who are doing this are not the tech companies, but they are sociologists, economists.

BOARDS NEED TO USE DIGITAL TOOLS TO UNDERSTAND AND EMBRACE THE DIGITAL AGEWhat is the average of Sri Lankan Boards? Lakmini said, usually Boards are older as they would have gone through the senior ranks and have experience when they take up the Board position. The age ranges from 50s- 60s and sometimes they are older. As she mentioned earlier this is not particular only to Sri Lanka. With the concept of digitalization of the Board if the Board is experientially working on digitalization then there is a fundamental understanding of cybersecurity because you would have asked the question of how secure is the system? If you don’t use the digital tools you won’t understand why it is so expensive and appreciate the need for it. The concept is the same throughout the company. Ruwindhu commented that there is nothing like experience and each Board director must embrace it.

Lakmini commented that BoardPAC attends many international IoD confer-ences and they have this same conversation. We may think that these countries are much more advanced and technologically savvy but Direc-tors when they vote at the confer-ences indicate that they do not have a proper understanding of technology. It human and not country specific.

Ransith shared that there were very young graduates who have created companies that will become quite large soon. They will have Board members who are young and digital-ly savvy. Companies should be reaching out to them and leverage on their expertise.

In conclusion Ruwindhu asked the panellists with Sri Lanka celebrating 71 years of independence what is their vision of Sri Lanka when it celebrates 100 years of independence? Lakmini

Lakmini commented that Sri Lanka being a small island and embraces globalisation using these technolo-gies could leapfrog and achieve something. Ransith thought that there was a lot of potential and with digitiza-tion we could bring people back to Sri Lanka as they could work from within Sri Lanka for overseas companies. Kapila was of the view that there wouldn’t be a Sri Lanka in 30 years! He explained that digitization will take away the concept of a nation state and people will be digital nomads and there won’t be a need for a Govern-ment and Politicians! Rohan shared that he saw Sri Lanka being a very important part of the Bay of Bengal region and don’t think that the borders are going away. There will be some interesting possibilities for Sri Lanka.

The closing remarks were delivered by SLID CEO Ms. Chamindā de Silva who thanked the Platinum Event Sponsor One Galle Face and SLIDs annual corporate partners Certis Lanka Security and Allianz Insurance, annual print media partner Wijeya Newspapers, Hospitality Partner Cinnamon Grand and the participants for attending the event. The evening concluded with refreshment being served and the opportunity to network where further discussion on the topic continued.

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Since its beginning, the Sri Lanka Institute of Directors (SLID) has been the focal point for Boardroom Corpo-rate Governance and believes that ‘better governance means better resource allocation, better business and better returns which will ultimately drive economic growth in the country’.

SLID frequently organizes events for the membership, not only in Colombo but also conducts seminars around the island.

Over the last few years SLID has taken the message of corporate governance to the provinces abso-lutely free of charge to the partici-pants. To date SLID has covered Kandy, Ratnapura, Trincomalee, Hambantota, Matara, Gampaha, Batticaloa, Kilinochchi, Jaffna, Mannar, Vavuniya and Ampara.

As part of this initiative, a seminar was held recently for small and medium sized businesses in Anuradhapura, focusing on how small businesses could conduct business better and more responsibly to spur their growth.

The seminar, organized by SLID in partnership with the Central Bank of Sri Lanka Regional Office in Anurad-hapura, included presentations on the formation of a company, legal procedures of registering a company, and finance, accounting and tax issues faced by small businesses. The presenters were Ms. Dilini Pathi-rana, Lecturer at the Law Faculty, University of Colombo, and Mr. Sanjeewa Basnayake, Director, KPMG, Kandy-Kurunegala Branch.

“Comprehensive, custom-made training programs like these help entrepreneurs and small business owners improve their corporate governance to operate more efficiently, obtain access to capital, and mitigate risk with safeguards against mismanagement” said Ms. Chamindā de Silva, Chief Executive Officer of SLID. Small businesses in emerging markets generally rely heavily on a few talented people—most often the founders, who dominate the decision-making process. The com-

mand-control system is common, strategic and operational decisions occur informally, and there are very few written policies. If such compa-nies are well governed, with sound corporate governance principles in place, they will usually outperform other companies and will be able to access different forms of financing easier to help further growth.

This year too SLID plans to continue its efforts spreading the message throughout the island.

SLID TAKES THE MESSAGE OF GOVERNANCE TO ANURADHAPURA

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SLID once again partners with CSE, IFC, the Australian High Commis-sion, UN Global Compact, UN Women, the World Federation of Exchanges, Women in ETFs and the Sustainable Stock Exchanges in this ceremony to ring the bell for gender diversity, an event initiated by SLID at the request of IFC in 2016. It was the SLID Immediate Past Chairper-son, Ms. Shiromal Cooray who approached Mr. Vajira Kulatilaka, the then Chairman of the CSE, to host the event.

The opening remarks for the morn-ing was delivered by Ray Abeywar-dena, Chairman, CSE who stated that the CSE was fully committed for equal opportunities, adding that they were looking at strengthening the women participation at board level. He was proud that at the CSE they ‘walk the talk’ where 40% of their staff and 45% of their senior man-agement were women.

SLID Chairman, Preethi Jayawarde-na stated that “At SLID we strongly believe that gender equality is essential for a high-performing and talent-led organization. We believe that enabling the potential of women is central to ensuring sustainable and inclusive development, both in business and the community”.

Over the years SLID has been conducting a series of programs with special focus given to Women on Boards. Paving the way for women to embrace leadership roles in the corporate world and discuss-ing the issues faced by women in leadership are key objectives of these programs. He also shared that their consultants with the Securities and Exchange Commission (SEC) has been positive with their sugges-tion for progressive quotas for women on boards and had been included in Budget 2019 presented on the 5th of March 2019. He stated that this was unprecedented and went on to thank the SEC Chairman, Ranel T Wijensinha and his team for

spearheading this initiative. He requested companies to get in touch with SLID if they were looking for suitable candidates.

Acting Australian High Commissioner to Sri Lanka and the Maldives Jon Philip said achieving gender equality does not just benefit women, but it benefits everyone. He stated that Australia has chosen to focus on women’s economic empowerment in the private sector because this is where they see greatest potential for impact. “Our Women in Work partnership will create more and better private sector employment and business opportunities for women,” the Acting High Commissioner said.

Global Compact Network Sri Lanka Director Rathika De Silva said Sri Lanka needs more women participa-tion in all sectors of our economy. He believes that gender equality and women empowerment will enable Sri Lanka to continue towards a sustain-able development while setting high standards in these areas.

“As business leaders, entrepreneurs, employees and consumers, women are fundamental to inclusive growth,” stated Amena Arif, IFC Country Man-ager for Sri Lanka and Maldives who shared some statistics from the IFC research on ‘The case for gender diversity among Sri Lanka’s Busi-ness Leadership’ that was launched

at the event. Also launched at the event was the 2nd edition of the ‘Women on Boards on Companies on the CSE which IFC did in collabora-tion with SLID, CSE, the Australian High Commission.

Chief guest of the event was Dr. Asha De Vos, a Marine Biologist, who in addition to being the first and only Sri Lankan to gain a PhD in marine and mammal research, is also the only Sri Lankan to be included in BBC’s 100 inspiring and influential women in 2018. Delivering the key note address she stated that “Women have to work twice as hard as the average man because the system is not built to support us just yet, but we have a long way to go”. In her experi-ence the system would adapt if the person forges ahead with that change. “Strive not to be defined by your gender, but your capacity,”.

At 9.30 a.m. the trading bell was rung by Marine Biologist, Ocean Educator and Blue Whale Project Pioneer Dr. Asha De Vos to mark Sri Lanka’s commitment to gender equality in the presence of Global Compact Network Sri Lanka Director Rathika De Silva, Acting Australian High Commissioner Jon Philip, IFC Country Manager Amena Arif, SEC Chairman Ranel T. Wijesinha, Nations Trust Bank Direc-tor/CEO Renuka Fernando, SLID CEO Chaminda de Silva and CSE Chairman Ray Abeywardane.

SLID, IFC AND CSE RING THE BELL FOR GENDER EQUALITY IN 2019

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A seasoned audit committee chair once remarked that every new appointee to the board should do time on the audit committee, as it provides such a comprehensive and all-encompassing view of the business and the challenges and risks faced by the company.

As organizations have entered the digital era, IT governance gains importance. ‘Is IT governance an area which the audit committee should oversee? Or does this go beyond the purview of the audit com-mittee?’ This was the focus of the 18th Audit Committee Forum hosted by KPMG recently. The panel discus-sion was conceptualised and moder-ated by Suren Rajakarier, Head of Audit, KPMG in Sri Lanka. In most governance structures the board of directors is responsible for the strate-gic direction and decisions regarding IT and the audit committee is only responsible for the oversight of certain strategic and operational aspects of IT affecting financial reporting. However, Rajakarier com-menced proceedings by challenging this status quo by presenting an alternate view where globally many audit committees have oversight responsibilities for a range of other risks that have become increasingly complex and challenging in the

current business environment – from operational and compliance risks posed by globalisation to cybersecu-rity and other risks related to emerg-ing technologies.

The panelists at the forum included Thilak Piyadigama Chief Operating Officer and Senior Executive Vice President of Nations Trust Bank, Ranjani Joseph KPMG Partner and Head of Banking Services and Suran Wijesinghe Executive Vice President of John Keells Group. The Forum members are chair persons of audit committees and members of audit committees.

TONE AT THE TOP IT governance is the structure, over-sight and management processes which ensure the delivery of the expected benefits of IT in a controlled way. Therefore, Ranjani Joseph, commented on, ‘the importance of tone at the top and an IT governance framework, to ensure IT services do not function in a parallel universe, but wraps all activities of the organization to deliver results’. Her view was, traditional operational risk factors have changed with the proliferation of technology and most companies have become technology dependent. Therefore, audit committees specifi-cally need to understand key risks

arising from technology and oversee measures of mitigation.

One suggestion that came up and was discussed at length was the importance of audit committees using the CROs and Internal Auditors to maintain an ongoing dialogue with the Audit Committee on IT related risk such as cybersecurity, digitaliza-tion, etc. Ranjani also articulated the need for preparing a risk register and a matrix where risks may be graded based on severity and likelihood of occurrence for continued monitoring by the audit committee.

IT AS A BUSINESS ENABLERThilak Piyadigama, was of the opin-ion that IT is a business enabler. He discussed how processes may be used to ensure new projects to deliv-er solutions that meet business needs and also to be delivered on time and within budget. His conten-tion was that Chief Information Officers must be evaluated if the quality of IT systems & resources are appropriate for business needs. Some corporates use a CISO in such a process.

Suran Wijesinghe’s comments covered the aspect of –‘How audit committees should approach IT risks to put in place safeguards against

KPMG HOSTS THE 18TH AUDIT COMMITTEE FORUM

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such risks?’ He said in relation to developing the scope of IT projects, the audit committee should clearly demarcate to management what is acceptable risk and what is not.

Management should develop the scope of IT projects within this frame-work, to keep risks within the set boundary.

It was observed that in the future, the Audit Committee and Integrated Risk Management Committee may be merged as there are significant over-laps in responsibility and communi-cation between the two is integral to avoid key operational risks being overlooked by both due to a slip in the terms of reference!

KEY POINTS AND TAKEAWAYSRajakarier concluded the Forum by summarizing the robust discussions and highlighting key learnings for the Forum;

The frontline should be aptly trained to identify severity of risk and rank it according to the organization risk appe-tite. This should be a continuous training and development requirement which should be monitored and improved with changes in the world. No person should be considered too junior to evaluate or identify risks. The first line of defense for any organization is the operational staff and attention to

developing a culture of risk manage-ment is equally important to the board and the audit committee.

Larger and complex corporates should consider recruiting a CIO and/or CISO and use a recognized IT governance framework to docu-ment and monitor activities, for example CoBIT, ISO standards, etc. As disruptive technologies move firmly into the mainstream, they will drive business transformation over the next 3 years. 1 in 3 global top tech industry leaders predict Block-chain will likely disrupt their compa-ny. Blockchain results in greater operational efficiency, increased trust between institutions, and reduction in labour-intensive data gathering, processing time and costs. This is only one such disrup-tion and it is critical to assess the impact of emerging technologies on business and society, continuously. Transparency about how emerging technologies being implemented is important to the non IT personnel, audit committees and Boards.

The 18th Audit Committee Forum was hosted at KPMG. The Forum which operates under the aegis of the Sri Lanka Institute of Directors has been supported and enabled since inception by KPMG, in line with its globally recognised Audit Committee Institute initiative. Suren

Rajakarier facilitates these sessions using appropriate KPMG thought leadership during the sessions and moderates the discussions.

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The advance in technology has affected every business and sector in some way, good or bad, and accountancy is no exception. As technology becomes increasingly more sophisticated, accounting no longer needs to adhere to the tradi-tional ways of working. With the right tools and systems in place CFOs can be more forward thinking and turn attention to finding new ways of adding value. SLID and CIMA on 21 February 2019, presented a knowl-edge sharing event the ‘Future of Finance’, which was an exclusive and free event to SLID members.

In his welcome address SLID Chair-man, Preethi Jayawardena said “SLID’s relationship with CIMA goes a long way back where in 2011 we jointly published a ‘Corporate Direc-tors Handbook’ which we hope to update this year. Yesterday, we signed an MOU with CIMA to re-es-tablish this partnership and continue collaborating on areas of interest to members of SLID and CIMA. We look forward to working together with CIMA”.

CIMA Global President Steven Swientozielskyj, presented the key findings from CIMA’s future of finance global research project which was designed to bring together different organisational views, to create insight into the process of change, synthesise a composite picture of the finance function of the future and to ensure the continued relevance and employability of current and future holders of the qualification. Steven, shared that the key drivers of change were globalization, geo politics, consumer empowerment, technolo-gy, and demography. He said “The traditional role of finance is changing” due to the adoption of technologies such as the cloud, analytics, AI, and block chain. He advised that to be in the forefront we should be asking the question “What technologies are being innovated today that could affect the finance function?” The finance director is a business partner who not only knows finance but can also give strategic input.

Steven also shared the latest devel-opments in technology relating to

finance, such as the changing role and mandate of finance. He ended his key note presentation by stating “The future of finance is already here. But it is unevenly distributed. Let us share its distribution with you”.

A panel discussion followed with Venkkat Ramanan, Regional Vice President of CIMA APAC as the moderator and Nandika Buddhipala, CFO Commercial Bank, Naveen Gunawardane, Managing Director/-Co-Founder, LYNEAR Wealth Man-agement, and Steven as panelists. The panel discussed how their orga-nizations were facing the challenges brought on by the dynamic techno-logical changes, the role of profes-sional ethics in a rapidly changing world. They also shared how as finance professionals they see the future of finance evolving from a local perspective and what directors and CXOs need to watch out for.

SLID AND CIMA PRESENT THE ‘FUTURE OF FINANCE’AN EXCLUSIVE EVENT FOR SLID MEMBERS

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There is a general misconception that risk management is only for large companies. Many others wrongly believe that assessing finan-cial risk is the key to a successful risk management strategy. A few others fall into the trap of believing that current risk management strategies are fine as they’ve been doing alright without any disaster in the past. All these are too far from the truth and will lead to unsuccessful manage-ment and governance practices.

Risk management is the identifica-tion, assessment, and prioritization of risks. Risk management in normal life means that risk should be avoid-ed but in corporate life it does not mean the same. It is defined in ISO 31000 as the effect of uncertainty on objectives (whether positive or nega-tive) followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortu-nate events or to maximize the reali-zation of opportunities.

A Company should focus on achiev-ing growth and profitability within appropriate risk/control boundaries to remain sustainable. The people in charge of governance must ensure that there are adequate controls in place for monitoring risks. Whereas the people in charge of the unit tasked with risk management must ensure they probe, analyse and take steps to mitigate negative impact and

accept risk within the agreed appetite for risk and set boundaries.

The senior management recruited to develop plans to execute the strategy set by the board must put in place a process to manage risks arising from execution. Oversight responsibilities for the senior management activities rest with the board. To fulfill this responsibility the board should select competent board members, establish guidelines to govern the board, approve the overall risk appetite of the company, approve plans prepared by senior management and recruit competent senior management.

The COSO enterprise risk manage-ment framework is made up of eight components, as listed below and may be followed to have an effective risk management function;

• Internal Environment – How risk is viewed and addresses -risk manage-ment philosophy and risk appetite, ethical values, etc

• Objective setting – Management must have a process to set objec-tives and ensure it aligns with entity’s mission and are consistent with risk appetite

• Event Identification – Internal and external events affecting achieve-ment of objectives must be identi-fied, distinguishing between risk and opportunity

• Risk Assessment – Risks are identi-fied and analyzed considering likeli-hood and impact, as a basis for determining how they are managed. • Risk response – Develop set of actions in line with risk appetite – avoid, accept, reduce or share risks

• Control Activities – Policies and procedures to ensure risk response is effectively implemented

• Information and Communication – relevant information is identified and communicated in time for people to execute functions

• Monitoring – Entirety of enterprise risk management is monitored and modifications made as appropriate, regularly.

The convergence of governance with risk management activities takes place when the board performs the important tasks assigned to them-selves and also has effective over-sight over the operation of a risk management framework.

Partner KPMG Sri Lanka and work-ing committee member of the Audit Committee Forum.

CONVERGENCE OF RISK MANAGEMENT AND GOVERNANCE

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WRITER:Suren Rajakarier,

RISK ARISING FROM

ORIGANIZATION

MAN

AGEM

ENT

ACTI

ONS

RISK RETURN

GOVERNANCE

“Another one!” A man in clothes mottled with stains yelled above the congregation. His hand clutched a wrinkled bill as if his life depended on it.

“One for us too. Please! …” A gaunt lady fought to keep their place in line. Clung tight to her legs was an undersized boy with a baby strapped on his back. The tiny child cried loudly in hunger. The chef, face glistened with beads of sweat, was doing his best to maintain the rapid flow of noodles going into the pot. He appeased his customers “Only one bowl per person! Please back away when you get yours.” “Omachi kudasai” (お待ちください) Please wait a moment.

That was the defining moment…

That was the defining moment for Momofuku Ando – a Taiwanese born Japanese. His leadership energy was primed.

Back in 1950s when Japan was

rebuilding from its defeat after World War II, Momofuku was a middle-aged man deep in bankruptcy after a series of unsuccessful businesses.

The scene in that small alley prompted Momofuku to think: There must be a better way to cook noodles than just bowl-by-bowl. “I need to find a way that allows everyone to cook their own noodles and not be starved in line.”

His purpose was born.

“Ouch… Not again.” Momofuku’s wife yanked her hands away from the splash-ing oil. She was cooking yasai tempura, battered fried vegetables, for dinner.

Chasing after his goal, Momofuku had been stuck for months tackling a problem: The short ‘shelf life’ of his dried noodles invention.

Traditional Japanese noodles – Ramen – were made fresh with boiling soup. This customary water-based process meant that noodles couldn’t be stored for an extended period. This perishable

nature was a huge roadblock for Momofuku.

Until he saw his wife cooking that day. “That’s it!” Momofuku proclaimed ecstatically. “We fry the noodles for storage and let them soften back in water when we want to eat!” He could barely contain his excitement.

Just like that, the era of ‘Instant Noodles’ began.

His first creation, ‘Chikin (Chicken) Ramen’, became available on 25th of August, 1958. Momofuku would eventually achieve tremendous success in Japan with expansion after expansion of his business.

However, his dream of ‘putting noodles on every table’ did not end there.

“This is a stupid idea. I am telling you Americans don’t eat noodles. We eat hamburgers and hot dogs with our hands. Look around. Do you see any bowls? Any chopsticks? How are they going to eat your noodles?” Local investors shot down Momo-

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SPACE NOODLE

Knowledge

DR THUN THAMRONGNAWASAWAT Director, Research & Curriculum

www.iclif.org

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fuku’s proposal of bringing his noodles to the US.

Where one saw an obstacle; another saw an opportunity. Faced with this new challenge, Momofuku rerouted his energy and came up with a winning solution – instant noodles in a cup.

“No bowls you say? Then I’ll sell them in a cup. We will put a snap-opened fork inside, too. Just fill it with hot water from a kettle. It’s as convenient as a hamburger!” Momofuku coun-tered with yet another innovation. And the rest was history.

His invention started the next era of ‘Cup Noodles’. The all-inclusive product first appeared on US shelves in 1971. It would go on to become tremendously successful all over the world.

Momofuku was 61 years old. Yet, his dream of ‘putting noodles on every table’ would continue.

Brain Insights

1. Everyone has energy. The founding principle of leadership energy is that everyone has energy. It is the common currency that fuels all humans. Whether we are rich or poor; young or old; male or female; owner or employee, there exists energy within all of us. The challenge is to recognize that energy and do something useful about ours. Momo-fuku was just another 40+ years old failing businessman trying to get by in a difficult world. But he saw a pres-ent he did not like, and a future he aspired to create. Thus, his leader-ship energy was born.

2. Find your purpose. Give your story a meaning. Energy is merely a ‘currency’ much like money in our wallet. We need to learn how to best spend it – to find our purpose. What I love about Momofuku’s story was the clarity of his dream of ‘putting noodles on every table’. I recently interviewed Isabel Medem, a world’s top entrepreneur whose purpose was devoted to ‘putting a toilet in every home’. One Peruvian mother told her “my young son learned to use the toilet by himself because of what you have done”. A purpose is what makes your spend-ing your energy worthwhile.

3. Reroute the energy. A leadership journey is always uphill so leaders must learn to channel their energy upward. Momofuku ran into yet another problem trying to scale-up his production. Fried and dried noodles would not fit systemati-cally into their cups.

He was so nauseous with stress that one night he saw his house spinning and had to lie down. Amazingly that gave birth to a brilliant solution. Instead of trying to force noodles into cups, why not turn the cups upside down and ‘put cups over noodles’?

Thirty years later, instant cup noodles are available for people in every corner of the world. Had the aging inventor then fulfilled his vision of ‘putting noodles on every table’?

Not at all. At the age of 95, Momofuku’s leadership energy was still churning.

His next goal was to make instant noodles for astronauts during their duty outside the world. He wanted his noodles to ‘go to space’!

July 27th 2005 on the shuttle Discov-ery, Momofuku’s dream of ‘Space Noodles’ was realized. Unlike most other space food, the Nissin noodles were not squeezed out of a bag but rather eaten with chopsticks. “It wouldn’t be noodles if you slurp through a tube.” The near-century-old man beamed like a young boy. He was watching news footage of Japa-nese astronauts eating noodles while floating around weightlessly above the earth.

Two years later, Momofuku Ando left this world in peace – undoubtedly packed with a bagful of new ideas with him.

WHAT’S YOUR LEADERSHIP ENERGY?

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The title ‘Company Secretary’ nega-tively impacts the perceptions of board members. The suggestion is that the title discredits the role to that of simply an administrator, meeting organiser and tea maker!

The failure of boards and profession-al advisors, such as external auditors, has taken centre stage because of the clearer need to restore trust in the system of gover-nance. Consequently, the changing world order for companies is clear on what shareholders and other stake-holders expect from boards, and it is this need that has led to the rise of the importance of the Company Secretary.

Out of the ashes has risen a new professional, tasked with responsibili-ty for being the governance watch-dog. This is not an insignificant task as it demands that the historical stereotype of the Company Secretary be set aside to embrace the new, multi-faceted role of the modern Company Secretary as governance thought leaders and watchdogs.

In modern business, Company Secre-taries are key managerial personnel occupying pivotal positions in their companies. They have a central role in fostering good governance practic-es and supporting the development of highly functioning Boards.

The Company Secretary is a resource and confidante to the Board and senior management, providing advice and counsel on Board responsibilities and duties. They are integral to the company’s corporate governance as the glue behind effective decision-making and advancing priorities.

The Company Secretary is the guardian of the company’s reputa-tion, playing a pivotal role in main-taining the company’s legal and social license to operate. Aware of the dynamic interaction between all players within the Board room, Com-pany Secretaries can play a critical role in increasing the level of atten-tion and ownership of sustainability by the Board.

The Sri Lanka Institute of Directors (SLID) and the International Cham-ber of Commerce (ICCSL) success-fully facilitated a refresher program on ‘The Role of a Company Secre-tary’ on 7th February 2019 at the Hilton Colombo Residences with knowledge partner the Association of Board/Company Secretaries of Banks in Sri Lanka (ABCSBSL).

The programme commenced with A. R. Rasiah, Senior Vice Chairman, SLID welcoming the participants and giving an introduction to the Compa-ny Secretary. Chathuri Munweera,

Director/ Company Secretary, AIA, shared the basic legal presence, incorporation of a company, the statutory records that must be kept and what needs to be filed at the Registrar of Companies. The role of the Company Secretary in conduct-ing effective meetings, Board Meet-ings and Shareholder Meetings, and their role with directors was present-ed by Inoka Jayawardhana, Union Bank, Assistant Vice President-Head of Legal & Company Secretary.

An informative and interesting panel discussion followed moderated by Theja Silva, Company Secretary/ General Counsel of Nations Trust Bank PLC who is also on the Execu-tive Working Committee of the ABCSBSL. Panelists were Faizal Salieh, Vice Chairman, SLID, Shanil Fernando, Honorary Secretary, ICCSL, Chathuri Munaweera, and Inoka Jayawardhana.

COMPANY SECRETARY NOT PART OF MANAGEMENTFaizal commented that the Board Secretary and the Company Secre-tary should not be separate but they should be the same person. The question is whether the Company Secretary is Management or a member of the Board? He has observed that the Company Secre-tary thinks that he/she is Manage-ment, however they are a special

WHO IS A COMPANY SECRETARY? WHAT DO THEY DO?

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employee who is not part of the Man-agement. He also advised that the Company Secretary should look at the relationship between the Chair-man and the directors. He pointed out that discussions can be skewed by a dominant Chairman or director. The Company Secretary should assist the Chair in managing difficult conversations by setting the agenda right. He also suggested that the Company Secretary has a conversa-tion with Chair on how to manage difficult conversations prior to the Board Meeting.

Chathuri was of the view that the key was setting the agenda. She suggest-ed that the Company Secretary scan the environment and issues and have pre-conversations with the Chairman and CEO on what should be included in the agenda. This makes it easier to have the discussion.

Shanil was of the view that the Com-pany Secretary role is very dynamic and sometimes involves internal politics. There can be a Chairman who tries to drive the Board without collecting proper information from other directors. He stated that next to Chairman and CEO, the Company Secretary was very important.

IMPARTIALITY AND INTEGRITY ARE IMPORTANTIn answer to a question that was raised from the audience on what the non-negotiables in the role of Compa-ny Secretary were, the panel agreed that it was impartiality and integrity.

To maintain impartiality and integrity Faizal suggested that the Company Secretary should be placed on a special job grade and the reporting line should be directly to the Board and not the Managing Director or CEO. If the Chair is dominant and the Company Secretary knows that the Chair will manipulate the meeting minutes, then the best practice would be to first circulate the minutes to all. With regard to integrity, he noted that if things are being kept off the minutes in the best interest of the company then it’s good.

INDEPENDENCE IN THE BOARD-ROOM Chathuri commented that the Com-pany Secretary should always have an independent view of what happened and must not compromise. In the long term the Company Secre-tary will gain respect. With regard to signing she commented that the Company Secretary becomes liable to a lot of things as he/she is signing on behalf of the Board. She advised that there must be a checklist of why and what you are signing.

APPOINTMENT AND TERMINATION OF THE COMPANY SECRETARY. A newly appointed Company Secre-tary should request for a resignation letter from the previous Company Secretary. If it is a resignation, then a resignation letter must be submitted and recorded. Form 20 must also be submitted. If it is a termination by the Board then there should be a Board Resolution. Inoka advised that it is good practice to resign by submitting a letter to avoid issues with the Registrar of Companies. Shanil shared that the requirement by the Registrar of Companies arose as a result of a case.

Faizal explained that termination is usually by resignation. If a Board is dissatisfied with the performance of the Company Secretary then the termination process can be very straight forward. If the Chairman and Board feel that the Company Secre-tary is too strict and doesn’t bend the rules and they want someone to do what they want. The easiest pathway is to resign but he advised that if you value your brand value – you have the right to call for a Board meeting on this matter which should be discussed and included in the meet-ing minutes giving reasons for resigning. If the Board refuses the Company Secretary of this right, they should then take it to the Regulator.

A comment from the audiences was that the Registrar of Companies has peculiar requirements which may not always be backed by rules and regu-lations enacted by law.

Inoka advised that if there are any unreasonable requests, then the Company Secretary should meet with the Registrar and discuss and suggest that an opinion is obtained from a reputed Lawyer. Shanil suggested that the Company Secre-tary should build a relationship with Registrar of Companies.

TIPS TO COMPANY SECRETARIES TO FURTHER THEIR ROLEKeep yourself updated and relevantInoka advised that the Company Secretary should keep himself/herself updated, have a pre-meeting with the Chairman and directors on conten-tious issues and update them on best practices so they make an informed decision at the Board Meeting

Work closely with the ChairmanFaizal commented that it depends on the Board culture which can make it very difficult to be a gate keeper. He advised the Company Secretary to work closely with the Chairperson to building this culture until it gets embedded in the Boardroom. It also depends on the tone at the top and built through policies on most areas of Board operations. If actual practice deviates from these policies, then the Company Secretary can bring it to the attention of the Chair.

Advise new Board members of the their roles and responsibilitiesShanil commented that for a new company as a Company Secretary you will be incorporating it from birth to the end and you will have to advise new directors on what their liabilities and roles are.

Not part of ManagementChathuri advised that the Company Secretary should remember that they are not in Management but oversees policies and gives advice.

In summary the panel agreed that the Company Secretary role is straight-forward and that there should not be any shortcuts. The Company Secre-tary should know the applicable rules and regulations and build up on this. It was best practice to have a Board charter and polices.

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NEWS FROM THE SECRETARIAT

PAYMENT OPTIONSWe have introduced digital payment options - online payment gateway via HNB and the Dialog Axiata Genie App. Please contact the Secretariat on 112301648 for more details.

RESIGNATION We bid adieu to Nicholas Alexander, Junior Marketing Executive, who has been a very active member of the Secre-tariat for 2 years at SLID. We thank him for all his positive contributions to SLID. We wish him well in his future endeavours.

ANNUAL MEMBERSHIP SUBSCRIPTION 2019/20The Annual membership subscription cycle for Ordinary, Associate, Retired, and Affiliate members is from 1 April. Your invoice for the period 01 April 2019 to 31 March 2020 will be forwarded to you and payment must be received before 15 May 2019. For payment options please contact the Secretariat on 112301648. New members who joined during the period January to March 2019 have not been forwarded invoices as they have already paid their annual subscription for 2019/20.

CHANGE IN DETAILSHave you changed your details such as Directorship, company, job, or changed addresses?Help us make sure SLID communications reach you by keeping us updated with your current contact details. If the details we hold on you are out of date, you may miss out on important information and opportunities.What information do you need to update?

The information we hold includes your name, designation and company. Your home and company addresses, your home or mobile phone number and your alternative email address are all important for us to be able to contact you. You can update your details at any time by emailing your new details to ops@slid.lk or by calling the Secretariat on 2575295.

SLID SIGNS MOU WITH CIMAIn February 2019, CIMA signed a Memoran-dum of Understanding to collaborate on areas of interest to members of SLID and CIMA. We are envisaging similar collaboration with similar organisations as well.

REMOVAL FROM MEMBERSHIP REGISTERIn keeping with our policy on membership, the SLID Council decided to remove with regret 17 members who had not paid their 2018/19 dues by 31 March 2019 from the SLID mem-bership register. They have been communi-cated to this effect.

L to R: Venkkat Ramanan (CIMA Regional VP Asia Pacific) andPreethi Jayawardena (Chairman SLID)

April 24 Audit Committee Forum – Session 19 ‘Key Audit Matters and the Role BAC can play’ June 27 Annual Members Meeting (AGM) followed by drinks reception and networking

SLID CALENDAR APRIL 2019 – JUNE 2019

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guruSLID

What benefits does one get by being a member of SLID? Is there a mechanism to identify talented individuals and fast track them to be seconded to boards?

Develop skills and knowledgeWe offer a dedicated training programme, which includes a wide range of offerings – from one-day workshops to our flagship Board Leadership Director Certification programme. Furthermore, keep abreast with new innovations and ideas including global best practice and learn from knowledge experts and fellow directors at our regular Power Evening series of events.

Thought LeadershipAccess to specialized forums such as the Audit Committee Forum and the Independent Directors Forum which meet quarterly and discuss relevant Boardroom issues. SLID is launching its third forum for Women Directors in May/June 2019. Receive the quarterly publication, the Director magazine, which is circulated free of charge to all members, Weekly update of Bills and Gazettes presented in Parliament.

Grow business contacts and networkComing along to SLID events will allow you to connect with fellow members and hear from inspirational business people and global thought leaders.

Be inspired and inspire your team to grow At SLID we celebrate business leaders and through our content in Director magazine and through our regular events, we share knowledge, experience and advice to help you keep your business on the front foot.

Special rates for membersReduced rates for all our forums, workshops and training courses including the Board Leadership Director Certification Programme.

Be a part of a special groupBe a part of a new culture of directorship who want to promote good corporate governance and share best international business practices.

SLID has no specialized mechanism in place to fast track members to a Board. However, if the company provides criteria, then SLID can assist in obtaining persons to the Board concerned.

SLID has been focusing over and over again on Governance matters, which I understand is the primary focus. However, the following new critical areas have failed to gain adequate attention at board level in terms of focus and board positions (still heavily driven by Finance professionals): Marketing, Public Relations (Reputation Management), Tech/Digital Transformation. What are SLID and Sri Lanka’s corporate boards doing to remedy this? Any statistics or quantitative data in this regard?

The board of directors forms one of the pillars of a robust corporate governance framework. Companies headed by diverse boards are generally considered to be more successful in the increasingly global and complex business environment. SLID promotes diver-sity among board members – in terms of gender, age, and skills, among other factors. In this regard SLID organises regular knowl-edge sharing events on a range of topics of relevance to board members. The most recent was on directors in the digital age. Past events have covered areas such as building future readiness in Sri Lanka, gender diversity, managing difficult conversations, moving an idea to execution, Taking over the mantle, cybersecurity, brand in the boardroom, and the new age CEO.

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Furthermore, SLID’s flagship Board Leadership Director Certification programme is open to all directors and those who aspire to be on a board. Participants have various professional qualifications which includes Marketing, Public Relations and IT amongst many others. The names of those who completed are added onto SLID’s list of potential Independent Directors and shared if they meet the relevant search criteria of companies. This is the only list in Sri Lanka which includes names of people who have completed a director certification programme which is accredited by the Securities and Exchange Commission of Sri Lanka (SEC).

There’s no single recipe for who should sit on a board. It is up to the board to decide on the skill set required and its diversity policy.

Whilst the board may not always be composed of specialists to focus on Marketing, Public Relations and Tech/Digital transforma-tions, it doesn't preclude itself from seeking guidance from such specialists within the organization or outside when needed. Sec 190 (1) permits directors to do so.

As indicated in the question itself focus of SLID is on Governance aspect. Hence SLID has no statistics or data on this matter.

In public quoted companies, risk management is an important area and there are medium to large sized companies in different industries either have set-up a separate division or are part of an existing function ex: finance. Under these circumstances, what is the role of the board in this regard and how can it monitor all types of risks and ensure investments are safe? How can non-executive & independent directors ensure there is complete transparency and to what extent are they responsible? Is there a rule to have majority of the board to be non-executive & independent directors say, 60%?

ex: there are some commercial banks & NBFIs that lend money to SME sector without a detailed scrutiny! there is ample proof to support this argument for ex: NPLs. Can the non-executive and independent directors insist on getting a 3rd party rating agency on the loan recipient's company?

The Listing Rules of the Colombo Stock Exchange and the SEC/ICASL Code of Best Practice on Corporate Governance mandate that specified proportion of the Directors of the Company be non executive and another proportion be independent. Criteria for independence is set out in the Rules and Code.

Ultimately the responsibility for risk management is with the Directors of the Company. They may delegate certain functions to separate divisions which have the relevant expertise (eg audit, actuarial, finance, legal) but remain responsible for compiling the data, reporting and mitigation measures are adequate. Directors can be responsible for irresponsible delegation. The companies law makes directors responsible to creditors and shareholders if the company trades whilst insolvent or diminishes its capital. All directors are required to dedicate adequate time and effort to matters of the Board and Company to ensure that the duties and responsibility owed to the Company are satisfactorily discharged.

Example—no comment In Private limited liability companies, to what extent are the non-executive & independent directors responsible in a board dominated by family members or friends? How do they ensure transparency and strike a balance between business development and governance? though it may not have much impact on the public but can impact other stakeholders like employ-ees.There is no distinction in the law between family directors, non-executive directors and independent directors. All remain equally responsible in the eyes of the law. Directors do owe various duties to other stakeholders such as the Government, employees, creditors, customers, neighbours etc. Many laws such as the EPF and tax laws make directors responsible if the company defaults. Their role as directors is to further the growth of the Company and return to shareholders but buy balancing the requirements of the other stakeholders as well. They are empowered to call for the relevant information. (A) Is there a performance measurement system in place for Board directors in public and private sectors? (B) How can SLID play a more active role in researching and updating the performance of all boards? (A) There is no mandatory performance measure in Sri Lanka, or indeed, in most places in the world. Board performance evalua-tion for listed companies is mandated** in the ICASL/SEC Code of Best Practice on Corporate Governance and listed Companies are required to report on this in their Annual Report. Most board appraisals are confidential and internally process driven. They are used by companies to improve the quality of board discussions and companies have mechanisms in place to address issues which arise from the appraisals.

(B) Role of SLID is indicated to question 5

The information on SLID Guru is a personal opinion offered as a public service and is not intended to be and should not be considered legal advice

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NEW MEMBERS

Lakshman SilvaChief Executive Officer/DirectorDFCC Bank PLC

Chaminda HindurangalaChief Operating Officer/DirectorElevators (Pvt) Limited

Laksanda GunawardenaDeputy General ManagerPeople's Leasing & Finance PLC

Upul DissanayakeManaging Director/CEOSerendib Finance Limited

Rolf BlaserCEO/Managing DirectorA. Baur & Co (Pvt) Limited

Seniya SamarasekeraManaging DirectorAudio Visual & Business Systems (Pvt) Ltd

Prasath NanayakkaraChief Executive OfficerAuxenta (Pvt) Limited

Rohitha PereraChief Executive OfficerCyaniq Global(Pvt) Ltd

Dilip Kumar De Silva WijeyeratneIndependent Non Executive DirectorSinger (Sri Lanka) Ltd & Hayleys Fibre PLC

Nilantha BastianNon Executive Director & Manage-ment & Marketing Consultant Softlogic Finance PLC/MA's Tropical Food Processing (Pvt) Ltd

Chathula SumathipalaDirector - Business Development & StrategiesSumathi Holdings (Pvt) Limited

Chadu SumathipalaExecutive Director Sumathi Holdings (Pvt) Limited

Monroe JayasuriyaDeputy DirectorLanka Evangelical Allianc Development Services (Leads)

Infiyaz Mohamed AliChief Executive OfficerHealthguard Pharmacy Ltd/Sunshine Holdings PLC

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Shantha BandaraChief Operating OfficerSunshine Healthcare Lanka Ltd/Sunshine Holdings PLC

Hiran SamarasingheHead of StrategySunshine Holdings PLC (Pvt) Ltd

Ravinda EdirisingheChief Executive OfficerSunshine Tea (Private) Limited

K. T. SupeshalaManaging DirectorSustainable Ventures (Pvt) Ltd

Harsha FernandoDirectorTama Trading Company (Pvt) Ltd

Binesh PananwalaChief Executive OfficerWatawala Plantations PLC

Surith PereraChief Executive OfficerWatawala Tea Ceylon Ltd/Sunshine Holdings PLC

Nishan FernandoGroup General ManagerWKK Engineering Co (Pvt) Limited

Gnanaraj RathnapandianManaging DirectorCrystal Pack (Pvt) Ltd

Manohara AtukoralaDirector/Chief Operating OfficerToyota Lanka (Private) Limited

Niranjan ManickamDirectorInsureme Insurance Brokers (Pvt) Ltd

Samantha Amal FernandoChairmanThe Chartered Institute of Marketing

Mano WeligodapolaHead/Department of BusinessManagement - Sr. Lecturer SLIIT Computing Business Engineering Campus

Damith PallewatteChief Risk Officer/Deputy GM-Risk/Chief Information Security OfficerHatton National Bank PLC

Chandana PanditharatneAssistant General Manager - ServicesHatton National Bank PLC

Anusha GallageChief Financial OfficerHatton National Bank PLC

Michelle SenanayakeGroup Head of Human ResourcesSunshine Holdings PLC

Aroshan SeresinheGeneral Manager- Business DevelopmentsSunshine Holdings PLC/Sunshine Energy (Pvt) Ltd

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ASIASTAR

2017