How a Company Can Build Resiliency in Uncertain Times

"Amid compounding challenges across the Americas, it's becoming abundantly clear that an actively engaged board is paramount to success," EY notes in its report that presents priorities a company's board of directors should consider in 2023 to build resiliency. The multinational consultancy adds: "Companies are navigating an unprecedented mix of challenges, from the ongoing pandemic to escalating cybersecurity threats, climate change impacts, evolving regulatory pressures and more."

What is more, "By overseeing strategies to navigate this complex business environment and provide guidance on transformational investments, boards play a crucial role in helping management teams explore different options, challenge assumptions and thrive under uncertain conditions. This resiliency — the ability to anticipate, prepare for, respond and adapt to a changing environment — is necessary in an increasingly complex world."

Based on the survey results and EY's direct engagement with hundreds of key stakeholders (including boards, individual directors, C-suite executives and leading institutional investors), the report has identified the following five board priorities for 2023:

Priority 1: Navigating uniquely challenging economic conditions

• How is the company planning for a range of economic scenarios, including those in which inflation and wage growth stay elevated for longer?
• How often does the board ask leadership: "What if we're wrong? What happens if a low-probability, high-impact scenario emerges? What would we do differently if that is the case?"
• What is the company doing to stress-test its balance sheet and develop a crisis playbook that gives company leaders comfort in their ability to manage even the worst-case scenario?
• How is the company building a resilient and sustainable pricing strategy? How is scenario-planning supporting that strategy?
• How is the company evaluating labor costs and decisions in the context of the company's longer-term talent strategy?

Priority 2: Rethinking capital strategy

• How is the company investing to motivate risk and create opportunity despite multiple headwinds?
• How is the company's investment strategy changing in key areas such as digital and technology, people and skills, innovation and R&D, and sustainability? How are the board committees coordinating their oversight of these matters?
• How is the company considering a variety of transactions (e.g., M&A , divestment, new joint ventures or strategic alliances to achieve its strategic goals? Are those options explored at the board level, or is the board presented only with management's decision?
• What is the company's approach to capital allocation (i.e., is it data-driven, consistent and enterprise-wide)? Does it focus on qualitative and quantitative metrics?
• How is the company's investor engagement program keeping key shareholders informed of the company's long-term value creation strategies and the board's related expertise? Do disclosures describing the board's composition demonstrate that, individually and collectively, the board is fit for purpose?

Priority 3: Enabling innovation and technology transformation

• How is the company's innovation budget and program contributing to the creation of an informed strategic plan leveraging emerging technology?
• How is the board thinking about and redefining competitors or industry boundaries? Who might now be a competitor that wasn't previously?
• How are responses to changing stakeholder demands, expectations and operational disruptions leading management teams to innovate?
• How are investments in innovation tracked and reported to the board? Is the board engaged in innovation discussions as part of the strategy-setting process?
• How is the board building a foundational understanding of evolving technologies such as the metaverse, including learning through experience?

Priority 4: Championing a future-focused talent agenda

• How is the board gaining insight into employee engagement, performance, operating statistics such as retention and turnover, and experience across different segments (seniority level, geography, function or business, etc.)?
• How is the company providing support for career path and progression, including mentoring, learning and development programs, and updating organizational design to open opportunities for advancement? Are upskilling and retention central to the company's talent strategy, including around key are as such as technology and sustainability?
• How is the company ensuring pay equity? How is it also creating a human- centered rewards policy encompassing compensation, wellbeing, flexible benefits, time off and more?
• How is the company enabling productivity and culture alignment in a hybrid working environment?
• Has the company leveraged a third-party assessment to validate that the company's policies and practices foster diversity and inclusion, and how can they be more effective? How is the company's DEI commitment integrated into the ways it serves its customers, communities and the market?

Priority 5: Overseeing cybersecurity and data privacy

• Have appropriate and meaningful cyber metrics been identified and provided to the board on a regular basis and given a monetary value?
  
• 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 management evaluate and categorize identified cyber and data privacy incidents and determine which ones to escalate to the board?
• Has the board participated with management in one of its cyber breach simulations in the last year? How rigorous was the resting?
• Has the company leveraged a third-party assessment to validate that the company's cyber risk management program is meeting its objectives? If so, is the board having direct dialogue with the third party related to the scope of work and findings?

The report also presents the following other priorities on the board agenda:

• What systems and processes are in place to monitor international and domestic legislative and regulatory developments and keep the board informed as appropriate?
• How is the company ensuring visibility across global supply chains and considering alternative suppliers to improve resilience to shortages or price volatility? Is it evaluating supplier relationships for potential geopolitical complications and exploring alternative supplier networks attuned to the new geostrategic environment?
• Does the company view climate initiatives as a means of protecting and creating more value for the business? How is it exploring opportunities to transform its business portfolios while reducing emissions?
• How is company engaging and supporting suppliers to influence emissions reduction through their supply chains? Has the company considered a strategic partnership or joint venture to help achieve its climate agenda?
• How well do management and the board understand how geopolitical developments affect current and future strategy? Is scenario planning being used to systematically explore multiple plausible future and their potential business implications?

I concur with EY's concluding paragraph that "[i]n this new era of permanent uncertainty and volatility, success will be based on resiliency and sustainability, including the ability to sustain shocks, self-disrupt, and contribute to the solution of societal and environmental challenges. To meet the challenges ahead, boards will need to strengthen their effectiveness through continual assessment and improvement."

What are your recommendations for how a company can build resiliency in these uncertain times?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.