The Real Cost of a Poor INED Appointment — Why Compliance Isn’t Enough

In regulated firms, appointing Independent Non-Executive Directors (INEDs) is often seen as a regulatory checkbox — a necessary formality to satisfy regulators and maintain licence requirements. But in today’s complex and fast-evolving sectors, particularly in financial services and digital assets, this attitude is a costly mistake.

Why the rush to compliance misses the mark

Too many firms take the easy route: they rely on recommendations from legal advisers or audit firms and appoint the ‘safe’ candidate. While this satisfies minimum regulatory standards, it can severely limit the board’s effectiveness and, ultimately, the firm’s strategic success.

The tangible risks of a ‘box-ticking’ approach

1. Skills misalignment: Boards without the right technical, regulatory, or market experience will struggle to provide meaningful challenge and guidance. Example: A regulated crypto exchange appointing an INED without deep digital asset or blockchain knowledge may miss emerging risks in custody or AML compliance, potentially jeopardizing their MiCA licensing journey.

   
   

2. Limited diversity: Regulatory bodies, including the Central Bank of Ireland and the FCA in the UK, increasingly emphasise diverse boards — not just gender diversity but diversity of thought, background, and experience. Diverse boards make better decisions and reduce groupthink. Example: A payments firm that ignored diversity principles ended up with a homogenous board that missed early warning signs of fraud risk, resulting in significant financial loss and reputational damage.

   
   

3. Compromised independence: When INEDs come from familiar networks, true independent challenge is compromised. Boards need members who can ask tough questions without being ‘captured’ by management or peer pressures. Example: In one fintech firm, the INED appointed via internal recommendation repeatedly sided with executive management, weakening governance oversight and triggering regulator scrutiny.

   
   

Executive search as a strategic lever

Engaging a specialist executive search firm is not just a ‘nice to have’ — it’s an investment in governance excellence. A thorough search process:

• Fully canvasses the market beyond familiar circles

• Identifies candidates with the right mix of skills, experience, and independence

• Supports diversity objectives by widening candidate pools

• Provides detailed candidate insight to boards for informed decision-making

  
  

How market mapping adds value

Beyond just filling a role, market mapping exercises provide valuable intelligence on market availability, salary benchmarking, and competitor positioning — critical for firms pursuing licences or entering new jurisdictions.

Case study: A regulated digital asset firm

A US-headquartered crypto exchange’s Irish entity, on the path to MiCA licensing, engaged an executive search partner to identify an INED with deep regulatory and crypto market expertise. The search uncovered candidates outside their usual networks, resulting in a more diverse shortlist in terms of background, experience, and perspectives. This helped the firm:

• Meet Central Bank expectations for board composition

• Demonstrate robust governance to investors

• Position itself credibly for future European expansion

  
  

Final thoughts

If your firm is operating in a regulated space, especially emerging sectors like digital assets or fintech, appointing INEDs is too important to shortcut. Regulators are increasingly scrutinising governance, and the reputational damage from a poor appointment can be severe. Don’t settle for compliance — aim for governance excellence. If you have to appoint an INED, make sure it’s the right one.