In regulated industries, the gap between management rhetoric and operational reality can build quietly — until it becomes a liability. A board member who recognised the warning signs describes how he navigated escalating red flags, chose to challenge, and ultimately chose to leave. Interview with Moritz Von Kunow, ILA Startup & Scaleup Committee Member.
You describe strong rhetoric around risk and compliance without corresponding budgets as a red flag. How do you distinguish genuine resource constraints from deliberate misdirection by management?
First glance evaluation is all about experience and industry knowledge. For everything else, you need to dive deeper. Obviously, you won’t have the functions mentioned in all industries. Where you do, they need to have what it takes to fulfil their mission. Since we are talking about regulated industries for these functions, there is even a certain ambivalence towards actual constraints. These are premier league rules! As for misdirection, you should increase density and intensity of questions and challenges as deviation from industry standards grows, worst case you are helping management to explain what they are doing and why.
Boards operate at a high level of abstraction. What is your method for validating that what you are being told in the boardroom reflects operational reality — without crossing into micromanagement?
Take your job seriously and challenge management. Inconsistency is not only a great source of reflection, it remains a great give-away. Use the structures of the company to your advantage. I like to look at compliance, risk and internal audit functions as my allies in control. Another good example are ISO audits, basically anything where other than operational staff are tasked with looking deeper. Look for sources of second opinion, instead of giving it yourself first. A board member should never replace a CEO, CFO, CTO, CIO, they should either fill their role or be replaced by someone who can. Your mission is to oversee, challenge and guide.
Weak structural discipline in core functions like IT is cited as a governance signal. How do you develop enough technical literacy as a board member to assess that risk credibly?
Quite frankly, few people can keep up with everything, although you should never give up trying! Ideally the plurality of people on a board should bring a mix of relevant skills, knowledge and views. Bring your skills to the table and see to it that others are able to cover your blind-spots. This is when collective magic happens.
What is the most uncomfortable red flag conversation you have had with a management team — and how did it end?
Badly, well not really, I left. All about AML, it is one of these non-negotiables of our time. If you see it is not working, challenge it. I got explanations, I proceeded according to what I described in my first answer. Someone will always tell you, the solution is just around the corner. My only regret was to stay longer than the first realisation that the answer was not sincere. Waste of time.
At what point does a pattern of red flags cross the threshold where a board member has an obligation to escalate or resign — and what makes that threshold so hard to act on in practice?
This is up to each individual’s risk appetite. You should escalate early, that is more efficient and gives people more time. The time for that is when you see potential for a red flag arising on the horizon. Start challenging, you are there to bring the company forward after all! Red flags need to be taken down, that is an imperative. Translated, this means either you believe in someone to take them down or not. The ultimate backstop is your exit. I personally believe this is mainly about trust in people to deliver. As a director one also has a different, stricter, personal liability as opposed to an employee. Make sure, you don’t pay for other people’s mistakes!
Editor’s note: As part of the collaboration between Silicon Luxembourg and ILA, members of the ILA Startup and Scaleup Committee are sharing their stories on governance. These reflect their personal views only and do not necessarily represent the official position of ILA.
