Technology top of mind for US boards in 2018
Rapid changes in technology are having an impact not just on companies but also on the behavior of boards. ‘The standard once-a-year, off-site, deep-dive strategy session is being supplemented with strategy briefings at each board meeting,’ writes EY. Some boards are also adding extra ad hoc committees that meet between board meetings to ‘sustain focus and momentum on long-term strategic initiatives and business transformations’.
Part of the issue for boards, EY writes, is that ‘business model transformation brought on by technology disruption and innovation often requires a longer-term focus and investment cycle, which can impair short-term results.’
As well as a method of ‘future-proofing’ their businesses, the umbrella of technology covers cyber-security: EY notes that according to its 2017 Global information security survey, while 69 percent of respondents have some form of formal cyber-security incident response capability, only 8 percent describe their plan as ‘robust and involving third parties and law enforcement’.
While technology tops the list of EY’s board priority predictions for 2018, other key issues include geopolitics and regulatory changes in second place, and aligning risk management with strategy and operating performance in third.
On the geopolitics front, EY cites everything from China’s global position in technology and business, Brexit and increasing tensions in the Middle East to North Korea and the ‘increasingly complex’ relationship between the US and Russia. In among that lot are the regulations set to be enforced across this year.
‘Policymakers appear to be focused on global developments related to taxation, data privacy, cyber-security and national security, causing certain industries to face increased regulatory scrutiny,’ writes EY. ‘Additionally, companies need to maintain their attention to compliance as new and complex regulations take effect, including changes to accounting standards on revenue recognition, leasing and credit loss, the auditor’s report and global data privacy rules.’
The third-placed issue for boards – risk management – is largely influenced by issues around technology, geopolitics and regulation, with EY advising boards to ‘support a shift in enterprise risk-management practices from a ‘protect’ effort to a ‘protect and grow’ approach in order to drive and sustain value creation.’
Completing the seven-strong list of board priorities is:
4. Balancing short and long-term capital allocation pressures from shareholders
5. Overseeing culture and talent in a time of innovation and transformation
6. Engaging with stakeholders on long-term ESG issues
7. Accelerating board effectiveness through composition, structure and assessments.