2019 demonstrated an evolution of corporate governance best practices. The focus on key issues like culture, talent retention and sustainability highlighted a significant turn for boards. So what can directors expect in 2020?
1: CYBER RISK LIABILITY
This year the World Economic Forum in its executive opinion survey, revealed that Cyberattacks for the second-year running are the number one risk in advanced economies. Cyber risk liability and repercussions of an attack is a worry that is going nowhere in 2020.
According to the Allen & Overy Directors’ Liability Report 2019/2020, over 54% of survey respondents experienced a ‘significant cyber attack or sizable data loss’ in 2019. It is evident that with fast paced technological advances, board members in 2020 are going to be concerned about cyber risk liability, particularly the risks associated with artificial intelligence and machine learning.
2: CULTURE RISKS
It can be a tricky business to assign responsibility in the wake of scandals linked to troublesome culture company. Board members who are physically removed from the day-to-day running of the company may be unaware of cultural crisis happening in real-time, but a shift is happening at board level.
In the wake of #MeToo lawsuits all over the world in 2019, many companies who experienced a fallout from this movement need to enter 2020 with directors firmly fixated on company culture. Deloitte recommend that board members ‘treat culture risk as part of an integrated process of oversight that addresses strategy, performance and risk’ as well as being proactive and persistent to reinforce a strong, positive culture.
3: TALENT RETENTION
Attracting talent in a tightening market and ensuring CEO succession is a key concern for board members, especially considering the growing gap between cyber talent shortages and the emergence of more powerful cyber threats. Within their most recent research on talent, ‘Talent 2020: Surveying the Talent Paradox from the Employee Perspective’, Deloitte have cited that in recent years economic turbulence has created a ‘talent paradox’ with a ‘resume tsunami’ ensuing. Their top take-away for board members to stem the talent tide? Start by making better use of talent by harnessing more the skills of employees and providing flexible work options.
4: PREEMPT ACTIVIST THREATS
Boards need to recognize the importance of shareholder engagement in order to better deal with activist attacks. Here are three pieces of advice for directors via the Harvard Law School Forum on Corporate Governance and Financial Regulation.
- Work with management to anticipate possible takeover attempts and activist attacks in order to be able to address them more effectively, if they should occur
- Meet at least annually with the team of company executives and outside advisors that will advise the corporation in the event of a takeover proposal or an activist attack
- Be open to management inviting a major shareholder or even an activist under appropriate circumstances to meet with the board to present the shareholder’s or activist’s opinion of the strategy and management of the corporation
5: GREEN GOVERNANCE
Sustainability related topics like climate change are already impacting the board room in a huge way. As asset prices are affected, investors are now more attentive to what is next. According to the Harvard Law School Forum on Corporate Governance and Financial Regulation, ‘it is clear that the shareholder-value maximization model of corporate governance is politically and commercially unsustainable in view of the acute challenges confronting this generation’. Yet In a recent PWC governance insights report, 40% of director respondents believed that climate change should ‘not be taken into account at all in company strategy’.
So how can boards address this key issue to effect change? Experts argue that the initial shift is a people centered-one, that management, senior executives and directors need to firmly steer. Richard P. Wells, Vice President and Director at a Cambridge based corporate environmental firm, advises enterprises that the key to ‘maintaining continuous environmental improvement is management’ and that management systems need to ‘identify, prioritise and evaluate environmental opportunities’. For a detailed step-by-step guide on boards going green, read our blog here.
If you want to streamline your corporate governance in 2020, adopting a board portal software to make board meetings and board communications run smoothly and securely is a move in the right direction. Contact us today to find out more about what DiliTrust Exec, our secure digital board portal, can help your board achieve in 2020.