(Second of two parts)
Boards play a critical role in helping management teams find ways to thrive in unpredictable circumstances as organizations today find themselves navigating a wide range of challenges. With so much uncertainty still present, boards must decide where to focus their attention. To better understand board priorities in 2023, EY conducted a study of more than 400 corporate board members across the Americas, including Argentina, Brazil, Canada, Chile, Colombia, Mexico, and the US. While the study focuses on western markets, the insights on the five top board priorities are also relevant for Philippine companies.
In the first part of this article, we focused on two of the top board priorities, which were navigating difficult economic circumstances and rethinking capital strategy through investments in technology. This second part of the article will discuss the remaining three priorities, specifically on how boards can enable innovative technology transformation, champion a future-focused talent agenda, and establish cybersecurity as an enterprise risk and strategic opportunity.
TECH TRANSFORMATION AND INNOVATION
Boards are crucial in helping to promote innovation, regardless of the state of the economy and the business environment. They can support the executive team in maintaining balance and push decision-makers to consider how the company can address new external challenges by innovating the business rather than investing or cutting costs.
Boards are in a unique position to provide thought-provoking hypothetical questions about potential new products, services, and income streams related to megatrends, such as how the emergence of Gen Z is changing employee and consumer trends. Scenario planning can further build resilience by allowing for the potential of uncertainty, challenging long-held beliefs, and spotting possibilities to redefine the future of the company through proactive innovation.
Despite the prevailing volatility, it is important to keep an eye on the longer-term developments that will shape the future of business. The value of operational, consumer, and market data is now being unlocked by advanced data analytics as the world enters a new era of data centricity powered by developing technologies. Deeper interaction is made possible by new human-machine interfaces, which also open up new avenues for communication, commerce, customer outreach, and the creation of goods and services. To best support their companies, boards must stay current on new technologies and their ideas.
For our planet and social institutions, new technologies and the behaviors they encourage in people carry both promise and risk. On one hand, technological advancement can lead to a new immersive virtual workplace, the capacity to reduce unconscious bias, the potential to encourage healthier lifestyles, and lowered carbon emissions by substituting non-polluting virtual experiences for real-world presence and physical goods.
However, emerging technologies can pose significant dangers for data privacy, fraud, false information, polarization and isolation, mental health, and energy costs. Better sustainability results need to be part of the future vision and strategy around new technologies and consumer strategies. This is especially significant at a time when stakeholder expectations and demands are drastically shifting in light of environmental and social developments.
A FUTURE-FOCUSED TALENT AGENDA
Global macrotrends are still influencing the future of work, making it more urgent for businesses to adjust to the shifting talent landscape. The structural shift in labor markets poses a formidable challenge as we suffer the highest global talent shortage in more than a decade. Employees are reevaluating and reordering the things they value most in an employer and are prepared to take action to satisfy those needs, with 68% of employers stating that employee turnover rose during the previous year. Previous methods used to attract and retain employees are no longer effective due to evolving employee needs, including the need for flexible and hybrid employment.
Highly-skilled employees will continue to retain more power even as the labor market cools. Millennials and Gen Z, particularly those working in the hardware and technology industry, are where the highest turnover is anticipated. Technologically-skilled workers are also in high demand, with inflation driving up the cost of competitive remuneration as a result.
It is crucial to monitor employee morale and workplace culture, as employers and employees have varied perspectives regarding the effects of hybrid, flexible, or mobile work options on productivity and career progression opportunities. If employees are not given the same level of flexibility provided during the pandemic, 54% of respondents to the EY Global Workforce Survey said they would consider resigning.
The ability of a company to retain talent may depend on whether or not its leaders are decisive and human-centered, with an emphasis on innovation, building trust, and exhibiting desired attributes. In order to get a more comprehensive understanding of employee needs and sentiment beyond simply gauging the tone at the top, boards may need to spend more time in conversation with the chief human resources officer to champion a future-focused talent agenda. They also need to evaluate the company plan for overall compensation, filling of any skills gaps, and talent retention.
CYBERSECURITY: A STRATEGIC OPPORTUNITY
The high degree of cyber risks that businesses confront are growing, with risks from ongoing digital transformation, flexible working, and the introduction of disruptive technologies having increased in 2022. Management must continue to stress the value of managing cybersecurity as an enterprise risk since the stakes are higher than ever, but should also see it as a chance to strategically position their companies as reliable business partners.
The board should set the tone by discussing cyber threats with management outside of the chief information officer (CIO) or chief information security officer (CISO). When developing new technology, goods, and business arrangements, CEOs should be questioned about how cybersecurity is incorporated into the design process from the beginning using the “trust by design” idea. In order to better challenge management, boards should be familiar with new or growing risks, the financial worth of the company’s risk (including the effectiveness of cyber insurance coverage), and leading cybersecurity risk management techniques.
Cybersecurity risk management in the current context is about response readiness and resilience. This means focusing on early detection, isolating important assets, preparing continuity plans to operate in a crisis, reporting to and working with authorities while managing litigation, and communicating with employees, customers, and investors.
Holding cyber incident simulations with management and the board should be prioritized, as well as stress-testing the organization to improve readiness and recovery efforts by clarifying roles and escalation processes. Third parties, such as a public relations agency or forensic specialists, can be included as necessary.
Finally, boards may oversee improved disclosures that make it clear to investors and other stakeholders how seriously they are taking cybersecurity threats and how qualified they are to do so. These disclosures are becoming more crucial as stakeholder scrutiny of these issues grows.
BUILDING STRENGTH IN RESILIENCE
To meet the challenges in this new era of constant uncertainty, resilience will be key to sustained success. Boards should work together with management to navigate uncertain economic conditions, rethink capital markets through investments in technology, pursue transformation and innovation, enable a future-focused talent agenda and elevate cybersecurity risk oversight.
Through continuous collaboration with management, boards will be able to build strength in resilience to weather ongoing volatile economic conditions.
This article is for general information only and is not a substitute for professional advice where the facts and circumstances warrant. The views reflected in this article are the views of the author and do not necessarily reflect the views of SGV, the global EY organization or its member firms.
Maria Vivian C. Ruiz is the vice chair and deputy managing partner of SGV & Co.