Institutional Research Series

Board Governance Framework

November 2025 20 min read

Part One: Fiduciary Duty & Oversight

Corporate directors have a Fiduciary Duty to understand the distinct risks of digital assets before authorizing treasury allocation. This goes beyond simple price volatility to include technical, custodial, and regulatory dimensions.

Defensive Documentation

To satisfy the Business Judgment Rule, boards must produce three "Golden Artifacts":

Investment Policy Statement (IPS): Explicitly defining asset class limits (e.g., "Max 5% NAV").
Custody Risk Assessment: Technical due diligence on the chosen custodian (SOC 2 Type II).
Keyholder Drill Log: Proof of quarterly recovery drills for multi-sig access.

Part Two: Treasury Allocation Risk

Before acquiring digital assets, the Audit Committee must quantify the impact of volatility on the company's working capital runway. The "Allocation Risk Simulator" models solvency under stress scenarios (e.g., -50% market drawdowns).

Stress Test

Allocation Risk Simulator

Estimate impact on runway under volatility stress.

Total Treasury ($M)

Crypto Allocation (%) 5%

Market Shock Scenario -50%

Impaired Treasury Value

$97.5M

Loss: -$2.5M

Board Recommendation

APPROVED (Low Solvency Risk)