Achieving IPO marks an incredible achievement for any organization. The path to get there tends to disrupt company operations as executives and boards of directors scrutinize the business from numerous angles. While many areas of a business experience transformation pre-IPO, what about the board of directors? IPO brings about many changes, including the Securities and Exchange Commission (SEC) reporting, a public view of the executive team, and additional financial and accounting responsibilities. IPO also means a sea of modern responsibilities and challenges—ones that boards of decades past did not deal with, such as the need for modern social media strategies, navigating with a demanding workforce, and massive cybersecurity challenges

To tackle these new challenges, smart boards must prepare—and practice—early. Getting to IPO typically takes many months, but private companies that know IPO is in their future can and should begin preparing as early as a few years in advance. Another way of thinking about this is guiding your company to a higher standard of operations. It makes a lot of sense to operate and act as an IPO-ready organization, even if you aren’t ready to make the move just yet.

Today’s public companies face modern challenges

Achieving IPO may not be a modern concept, but the world in which a newly public company operates is hardly anything like it was just a decade or two ago. It moves faster, it’s tech-powered and global. As companies prepare for IPO, they need to not only hit the regulatory requirements and button up their financial affairs, but their boards must also be prepared for an onslaught of contemporary issues. Here is an outline of the top issues facing boards as they consider an IPO:

• • Financial and reporting overhaul: Getting your financial and reporting resources in order is a top challenge for IPOs, a consistent challenge. Pre-IPO is not the time to run lean in the area of finance. Staff up, and make sure you’re confident that you have the right team in place to carry you through this transition. Boards must evaluate the chief financial officer as the leader of the entire IPO process, a critical member of the organization during this time of transition and preparation. Ask yourselves: does your CFO have public company experience? Can they communicate effectively with both the board and investors? A controller and possibly an SEC reporting expert will also be leading roles as reporting timelines and standards become a top priority. If your CFO doesn’t have IPO experience, see if a financial expert on your current board does. This board member can help stand up the board audit committee and help you evaluate your financial reporting systems, track the right metrics, choose an investment banking partner and organize your roadshow strategy, among many other duties. Even before you’re official, act like a public company by running through reporting deadlines and processes with your internal finance teams to ensure everything is in order. Practice may include mock quarterly conference calls and running through regulatory compliance aspects such as Sarbanes-Oxley. You may want to practice undergoing an audit as if you were a public company and having your work checked, and rechecked.
  • Document company policies: Many private companies operate without a set of standard policies and procedures; it’s just the way things have always been done and perhaps it works for them. But public companies are held to a greater scrutiny. You can’t just “get by” – you must have policies documented, such as codes of conduct, communications, social media guidelines, whistleblower protection, and so forth. There’s no reason to wait to tackle these policies; not only can you get ahead by starting early, but you can build up a lengthy ramp-up period to ingrain these policies into company culture and make them a thoughtful part of operations. A crucial policy for public companies: the Sarbanes-Oxley Act, which affects everything from audit committees to financial reporting and disclosure requirements. This act will require your organization to meet a variety of internal controls. As you prepare for the public market, it is essential that you must practice these policies first.
  • Prepare for crisis management: According to Harvard Law School, 65% of CEOs said their companies went through a crisis in the last three years, and 73% of CEOs expect a crisis in the near future. For any company, it’s best to take a proactive approach to crisis management, and this is especially crucial for public companies. Image is everything. Communication with the public and your shareholders goes from a “nice to have” to something that can break your company – or take it to the next level. Have a proactive, polished plan in place for crisis management of all kinds, ranging from data breaches that can crush consumer confidence and environmental responsibility to social media screw-ups and disgruntled (outspoken) employees. The best way to approach these “What if?” crisis scenarios is to think through each potential one and consider how your company would respond, and who within the organization will own which piece of the communication. Run mock scenarios all the way through the processes you develop, up to the board level. These mock scenarios will help you discover just how quickly your team can react in a crisis. They will help you quickly pinpoint where the bottlenecks exist from recovery to PR to cybersecurity and beyond.
  • Settle your brand story: Why do you exist, really? What value do you want to add to the public – and how are you doing that today and how will you continue to do so tomorrow? Why should anyone invest in you and why should the greater community care? Your brand story isn’t just the story of your founding, but it’s the bigger picture about why you’re here in the first place. Today, your potential shareholders want to understand you beyond your products and services; they want a relationship with you, and a deeper understanding of how you operate and interact with your employees and the world as a whole. Be prepared to explain yourself.
  • Know your cybersecurity strategy: Today, everyone cares about cybersecurity, and it doesn’t matter if you’re in IT. It’s personal. When consumers hand over their credit card on your website or trust you with their private information, be it an address or health care records, they expect you to handle those details with care and respect. Cyber threats are real, and they affect organizations of all sizes – no one is immune. What does your current security infrastructure look like, and how are you monitoring and responding to threats? And, what does that response look like at a public communications level? Facebook recently experienced a data breach that affected more than 50 million users. That level of a breach isn’t something meant to be handled solely within IT; it must be tackled at the board level.
  • Evaluate your board with fresh eyes: This is a difficult, but necessary, discussion. Your board of directors may have areas of weakness or redundancy. What areas of expertise are critical to the success of your organization, but not at all represented on your board of directors? When is it time for certain directors to move on and others to move in? This should be a candid discussion between the CEO and the current board. As a public board, you’ll need board directors to run the Audit Committee, Compensation Committee, and Nominating and Governance Committee. Do you have directors experienced in these realms today, with public company board experience? If not, you may want to put them in place at least 18 months in advance to stand up those functions and help you confidently operate as a public board day one. It’s more important than ever to begin these conversations early. Finding a new board member can take as little as six months or as long as several years. Don’t wait until IPO to undergo a board refresh.
  • Take a fresh look at employee engagement: Employees in today’s market hold more power than many organizations are accustomed to. This shift is accelerated by social media and the currency of brand power. Job seekers today ask for inside intel (“What’s it really like to work there? What’s the culture like?). Employees today aren’t afraid to make bold moves to demand change. Look no further than Google for a very recent example: employees worldwide walked out in protest of Google’s sexual harassment policies, resulting in Google making significant internal changes. This power – of the employee, of social media – is something unforeseen. Boards today must be strategic and proactive in their approach.

These are just a few of the challenges that modern boards face. While modern boards can’t control the world in which they operate, they can choose to get in front of these unique challenges. The time to do it is now. Start practicing now, well before IPO.