Listed below are the eight priorities that will be top-of-mind for board members in 2020 with each priority followed by questions for the board to consider.
1. Strategically prepare for growth amid increased uncertainty
"Current economic, geopolitical and social signals are mixed, creating uncertainty across business environments and requiring companies to consider both defensive and offensive strategies."
- Is the board effectively monitoring megatrends, new technologies and economic signals to gather early insights on potential impacts on the business?
- Is the board taking steps to continue bringing an outside-in perspective to the boardroom and keeping a pulse on disruptive technologies and innovation drivers?
- What methods is the board using to stay well-informed about key stakeholder demands, interests and preferences that can affect future strategic direction?
- Is the board allocating enough time for discussion of and planning for different economic scenarios and outcomes in a range of time frames?
- Amid ongoing uncertainty, is the board overseeing allocation of capital and other resources in a way that protects assets, optimizes operations and executes on long-term strategies for growth — both playing it safe and doubling down?
2. Accelerate the talent agenda and activate culture as a strategic asset
"Growing trends are continuing to change the future of work. Digitization is having a significant impact across all industries, affecting all businesses and the workforce globally. Employees are adapting to new technology, and new skills are needed to keep up with ongoing technological disruption."
- Does the board set the right tone at the top, including by dedicating adequate time to talent and culture discussions, at the board and committee levels?
- Has the company's culture been intentionally defined in the context of its strategy, and is there a shared understanding of the culture throughout the organization?
- How frequently does the board receive reports on the health of the organization's culture? If there are gaps or problem areas, how are they being addressed?
- Do the company's senior leaders understand the trends affecting the workforce of the future, and are they driving the necessary shifts in culture, training and development?
- Is the board receiving relevant data and spending enough time with the chief human resources officer (CHRO) to oversee culture and talent strategy?
- How is the company integrating human capital and culture metrics and performance into earnings calls, analyst meetings and its external financial reporting to better communicate long-term value?
3. Evolve enterprise risk management
"In late 2019, we surveyed 500 directors and CEOs from around the world on the topic of risk. The full results of the survey will be released in early 2020, but several key findings illustrate a need to evolve ERM."
- Is the board using external perspectives and independent data to identify and monitor emerging risks?
- Does the organization conduct risk assessments frequently enough to capture new risks and adjust its risk appetite accordingly?
- Does the board allocate enough time on the agenda for open discussion and brainstorming on emerging risks and trends?
- How can the organization improve its ERM practices and processes with the use of scenario planning, stress testing and technology-enabled risk analytics?
4. Prioritize cybersecurity and data privacy
"Cybersecurity continues to be a top priority for companies. In 2019, we learned that CEOs ranked national and corporate cybersecurity as the biggest challenge for the global economy in the next 5 to 10 years."
- What resources is the board using to enhance its competency on cybersecurity and data privacy topics and better understand emerging threats as well as legal and regulatory developments?
- What information has management provided to help the board assess which critical business assets and partners, including third parties and suppliers, are most vulnerable to cyber attacks?
- How does the board evaluate the company's culture as it relates to cybersecurity and data privacy? Are employees routinely trained? What security awareness messaging is regularly conveyed to employees? Are performance bonuses at stake?
- Is the company maintaining a defensible narrative with its customers and users regarding the collection, use and protection of their personal information?
- Has the board practiced a cyber-breach simulation with management in the last year?
5. Address geopolitics from a strategic perspective
"In recent years, the global economy has remained strong not because of positive geopolitical developments, but despite negative ones."
- Does the board have the capability to develop its own perspective on geopolitics? Does the board receive regular briefings on geopolitical risks and their potential implications?
- Does the composition of the board include members with geopolitical expertise or multinational experience (i.e., government, academia or civil society)?
- Does the board work with management in translating its perspective on geopolitics into operations?
- Does the board understand how geopolitical and related risks map to the company's geographical footprint and enterprise risk management policies and procedures?
6. Embrace ESG as a business imperative
"At the start of 2018, $12 trillion US-domiciled assets under management were categorized as environmental, social and governance (ESG) investment strategies, up from $8.7 trillion at the start of 2016. This represents one in every four dollars of the total US assets under professional management."
- Have management and the board sufficiently engaged with investors, consumers, employees and other stakeholders to understand their key priorities and concerns around ESG issues?
- Does management regularly assess and does the company clearly articulate what ESG factors are material to the business and how those factors are managed to minimize risk and maximize strategic opportunities?
- Do corporate disclosures explain how ESG is integrated into the company's strategic plan and risk management processes? Do the disclosures meet the information demands of key stakeholders?
- Has the company considered whether enhanced reporting would reduce the burden associated with responding to various ESG-related surveys or the challenges raised by external ESG ratings?
7. Redefine and better communicate long-term value
"Earlier this year we released a report that explored why and how boards should guide management to focus on the long-term, better understand stakeholder needs and objectives, and improve communications about how their companies create value."
- How does the company define long-term value? How would a broader definition of value, supported by data, KPIs and other nonfinancial metrics, allow the company to better articulate its value to investors, other stakeholders and the markets?
- What information or communications do key investors and other stakeholders need to invest their capital, talent and resources in the company for the long term? Does the company address those needs in decision-useful ways?
- Does management work collaboratively so that all the company's communications taken together consistently explain the company's value proposition and strategy?
- Are management's disclosure controls and procedures designed to enable the accuracy, reliability and understanding of nonfinancial measures used and disclosed?
8. Take a continuous improvement approach to board effectiveness
"Certain core characteristics and behaviors have been and remain foundational to board effectiveness. Yet as business environments change, so too must the board competencies and practices that drive board effectiveness."
- Have board meeting schedules and agendas changed to meet increased time demands?
- Has the board challenged its information practices to improve the timeliness and quality of board materials and information? Does the board complement management's information through engagement with independent experts and stakeholders?
- Has the board considered establishing ad hoc and advisory committees to address shorter-term matters or test formation of a new standing committee?
- Does the board use an independent third party to facilitate board, committee and director evaluation?
Based on my experience as a board member, I concur that "[b]oards must help their companies face uncertainty by embracing the duality of strategy, meaning they must strategize for challenges beyond the horizon while driving current business results."
I also support the report's conclusion that "[t]he role of board directors will grow increasingly complex in the years to come. Emerging technologies, changing social demographics, customer preferences, a volatile geopolitical environment and an accelerating climate crisis are among the megatrends redrawing today's risk landscape and redefining long-term value. We believe that considering these eight board priorities now will help boards succeed in the new year and beyond."