6 Disruptive Forces for Boards to Tackle

By Sabine Vollmer

March 15, 2017

Organisations are up against several forces that boards should consider, including technological advances, geopolitical developments, and a changing workforce. Boards that tackle the challenges could gain competitive advantages for the companies they oversee.

The EY Center for Board Matters and the WomenCorporateDirectors Foundation suggest boards increasingly focus on these six change factors:

1. Technological changes require a strategic overhaul. An increasing number of computerised devices in everyday life, including those in homes, cars, health devices, and supply chains, can send and receive data. Boards need to consider corporate strategies that receive value from the technological changes and drive new growth.

2. Big data and analytics drive risk management. Smart devices allow companies direct access to end users, who provide feedback on how products work. The data exchange makes product development shorter and smarter but also poses reputational and cyber risks. Boards need to recognise how important big data and analytics are in linking risk management and business objectives.

3. Human capital management is critical for competitiveness. A rise in artificial intelligence and robotics that will automate tasks and an increasing number of freelancers, temporary contract workers, and independent professionals require changes in how a workforce is managed, motivated, and optimised for team performance. Boards need to ensure management is giving employees ownership in the company’s future and monitoring successes and changes with robust metrics and an analytical approach.

4. The geopolitical and regulatory environment is dynamic. Boards need to confirm management has plans to address the risk of political uncertainty, the introduction of new accounting standards, tax reform, changes in global trade agreements, and increased reporting requirements under the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting initiative, as well as other emerging risks.

5. Capital allocations go beyond short-term pressures. Preserving the company’s competitive edge may require investing in new technologies and innovation initiatives, partnering to extend product lines and geographic reach, and experimenting with new business models. Ensuring businesses are making capital allocation decisions that go beyond short-term pressures and create long-term value is imperative.

6. Skills of board members align with the company’s forward-looking strategies. Boards should reflect a diversity of skills, perspectives, and knowledge to tackle evolving oversight needs, risk management challenges, and geopolitical and regulatory changes. Creating additional committees, hiring outside experts, or adding directors with specialised expertise can fill gaps.

Sabine Vollmer (Sabine.Vollmer@aicpa-cima.com) is a CGMA Magazine senior editor.  This article first appeared in CGMA Magazine here

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