Deliver on the Promise of AI, Unlock the Value of Data, and Eight Additional Opportunities for Tech Companies in 2025

In its "Top 10 Opportunities for Technology Companies in 2025," EY, a consultancy, explains that its report published in December 2023 "highlighted the need for tech businesses to reshape, reposition and innovate for success in a world led by generative artificial intelligence (GenAI). Throughout 2024, AI use-cases and copilot deployments surged across industries; however, many reached a plateau – often because companies were not fully prepared for the cost and organization-wide transformation to enable success."

The report adds that "To get ahead, tech companies – and their customers – need to move away from viewing AI as a capability applied to traditional business processes and instead fundamentally rethink and reinvent their business to operate in an AI-first era. Tech companies themselves can lead here by demonstrating their own internal transformation journey using their own products ('tech on tech')."

I agree with the assertion: "As 2025 unfolds, the acceleration of AI adoption will continue, but it will be against a backdrop of increasing capital needs, heightened global regulatory oversight and shifting economic landscapes."

The report's authors explain that "In compiling our annual Top 10 Opportunities for Technology Companies in 2025, we've attempted to provide a balanced, future-oriented view of the potential actions for tech companies across various growth and operational levers to drive value creation in 2025." Below are EY's Top 10 Opportunities for Technology Companies in 2025:

1. Deliver on the promise of AI: Transform potential into performance
2. Drive growth and optimize customer experience through an agentic AI future: Harness next-generation, semi-autonomous AI "agents" to create new customer offerings.
3. Adopt outcome-based pricing models to supplement subscription and consumption offerings: Get ahead of customer expectations with pricing that corresponds to customer value realization.
4. Demonstrate the power of an AI-first operating model: Rethink business models and processes to boost operational agility driven from AI.
5. Unlock the value of data: Assess opportunities to modernize and consolidate legacy systems to better harness the power of enterprise data.
6. Empower your workforce of the future with innovative training: Boost productivity and evolve skill sets for the era of AI.
7. Embed tax and legal functions at the outset of AI transformations: Improve strategic decision making by addressing rapid changes in tax, trade and compliance requirements by addressing them up front – not as an afterthought – to optimize business models and supply chains.
8. Inject AI into cyber defenses: Tech companies that embed AI-driven security solutions will not only protect their assets but also position themselves in the market as leaders in trusted innovation.
9. Move beyond contingency funds to free up capital to invest in emerging technologies: Free up resources by divesting non-core businesses/products to invest in high growth opportunities and drive sustainable growth.
10. Shape the agenda for incoming regulators: Actively engage with regulatory bodies to structure future frameworks and drive more consistency in regulatory outcomes.

The report concludes by explaining: "In 2025, tech companies have the opportunity to translate the excitement and expectations around AI into tangible business benefits for themselves and their customers. Seizing these 10 opportunities highlighted can help accelerate this goal, and in the process, shape tech companies AI-enabled business of the future."

How is your business utilizing AI to achieve tangible benefits for your team and your customers?

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.

Report Provides Recommendations on How to Achieve Enduring Board Effectiveness

While drafting a post on this forum about a report published by EY that provides recommendations on how boards of American companies can confront crisis and embrace opportunity, I found another report produced by the consultancy that provides "a comprehensive approach and framework for understanding and enhancing board effectiveness."

Authored by Kris Pederson, EY Americas Center for Board Matters Leader, this report presents a framework comprised of "a series of elements that must be intact for board performance to flourish. Two of these are foundational 'effectiveness' pillars that guide the work to be done by the board. These flow through five 'systemic' layering elements that embody the board's operating environment." She adds that "With a strong mission and engagement model supported by effective information practices, boards have a solid foundation for effective performance. The systemic board governance elements encompass the operating model and principles of an effective board."

According to Ms. Pederson, the first pillar of board effectiveness, board mission and engagement model, "The board's fundamental mandate is to provide insight, foresight and oversight on mission-critical issues that drive the company's governance as it advances its strategy, operations, financial performance, and stakeholder engagement to drive long-term corporate value. Guiding this mission are the board's own values.

Evidence of an effective board mission and engagement model includes:

• The board's corporate governance guidelines articulate the board's purpose, values and core engagement strategy and practices.
• Every board member can consistently state the board's mission and the company’s purpose, strategy and long‑term value proposition.
• Board members and management are in clear agreement about the mission‑critical company issues that demand board oversight. Each board member individually embodies core traditional leadership values and skills, including ethics and integrity, diligence and conscientiousness, executive‑level communication skills, and a commitment to progress.
• There is clarity as to the company's core policies, strategies and risk management approaches, and when and how the board engages to oversee them.

Regarding the second pillar of board effectiveness, information infrastructure, Ms. Pederson explains that "Effective boards are rooted in the diligent design and maintenance of reliable and efficient information practices that provide timely access to the highest-quality information and people (e.g., advisors, stakeholders, customers) needed to identify, illuminate and address evolving mission-critical issues." Moreover, "Boards should be specific with management about their information needs so that management is not overburdened with immaterial questions and potentially driven to expand board materials to include tangential information or excessive detail."

Evidence of effective board information infrastructures include:

• Board meeting materials include a cover memorandum that succinctly describes in a clear narrative form all items on the board agenda.
• Technical documents, such as financial reporting, equity compensation plans, merger agreements or other material contracts, are fronted with a one- or two-page (max) executive summary of material terms.
• All board materials are presented with draft resolutions clearly specifying the matters the board or its committees are being asked to act on.
• Boards and management are diligent about how they engage with each other to share information, respecting established communications channels and security issues.
• Neither the board nor management feels unduly overburdened with information overload or requests for information, respectively.
• The board regularly hears perspectives from third parties on critical issues and complex matters.

With respect to "Board composition, structure and leadership," the report notes that "Making effective determinations about the competencies, backgrounds and experiences needed on the board is key to building a strong board, keeping in mind that diversity across multiple dimensions is essential to board effectiveness."

Moreover, "Based on an understanding of the companies' strategies and emerging mission-critical issues, key stakeholder demands, and increasing regulatory scrutiny of board effectiveness, boards

should develop and maintain, in collaboration with senior management, a competency map (or board skills matrix) that identifies and scopes the skills and type of experience needed on the board. This analysis, which should have a forward-looking orientation, enables a more accurate and objective determination of effective board composition, size and committee structure."

Evidence of effective board composition, structure and leadership include:

• The board maintains, in collaboration with management, a detailed board skills matrix in assessing board size and composition.
• The board's corporate governance guidelines and committee charters clearly allocate roles and responsibilities between the board and its committees, including mission-critical issues such as strategy, risk, culture, compliance, technology, cybersecurity, and climate change.
• Board members periodically move across different committees, and committee structure and composition are reasonably fluid based on the company's needs.
• Committee chairs regularly collaborate on the most effective ways to govern overarching board responsibilities relating to strategy, risk and long-term value.
• Board and committee oversight responsibilities are periodically revisited as business environments and priorities shift.
• Committee chairs report to the board when they need additional resources, refreshed competencies or workload reallocation.

Regarding board dynamics, Ms. Pederson explains that "A positive board dynamic is one of the most critical elements in achieving board effectiveness. Many also believe that consistently maintaining a positive board dynamic can be challenging. For this reason, all board members, especially board leadership, need to work to nurture and consistently demonstrate respect and trust for each other." She adds that "Without a culture of respect and trust, boards cannot engage in constructive debate and instead devolve quickly into dysfunction. In their discussions and deliberations with each other, at meetings and informally, all board members should show evidence of their commitment to the board's mission, values and engagement model through active, informed and productive engagement."

Evidence of effective board dynamics include:

• Director participation at meetings is balanced: No single director or group of directors dominates agenda formulation, discussions or deliberations, and no single director or group of directors is passive or disengaged.
• If interviewed, each director would state that he or she felt included, heard and respected, and that all members demonstrate respect and trust.
• There are no "camps" or "factions" among board members or among board members and management.
• Directors say something when they see something, and the board takes appropriate action.
• The board engages in informal ways between meetings to enhance trust and build personal connections.

On the topic of board decision-making, the report says "Boards should be highly conscientious and intentional about when and how they make decisions. Leading boards develop a process to support effective decision-making, based on applicable state and relevant laws and the board's mission and engagement model.

Ms. Pederson adds that "For every matter before them, boards should question and assess how well the decisions they may make align with the company's purpose, culture, strategy, risk tolerance profile, and sustainability goals. Boards need to spend the time, access appropriate resources and consider alternative scenarios and outcomes before making final decisions."

Evidence of effective board decision-making include:

• The board and management maintain a delegated authority matrix, specifying corporate business matters that require board decisions.
• The board maintains a checklist of approval requirements in its organizational documents and under relevant law.
• The board chair establishes appropriate transparency around director voting by discouraging informal decision-making discussions and overseeing that the board's books and records are in order.
• The board does not make decisions without sufficient considerations about the quality of the information, timing, and risks and rewards.

As for the final element on systemic board governance, "Board outcomes and evaluation," Ms. Pederson points out "The ultimate outcome of a high-performing board is reflected in the success and prosperity of the business itself. A board should see the evidence of its efforts manifest in company financial performance, including growth through the innovation it fosters and cost reduction from the risks it helps the company avoid."

She importantly adds that "Indeed, investors, regulators and other stakeholders are seeking greater board effectiveness and are increasingly interested in board evaluation processes and results. The final component in the pyramid," according to Ms. Pederson, "includes a board evaluation process that not only results in a more effective board, but also leads to investor trust."

Evidence of effective board outcomes and evaluation include:

• The board, its committees and each director conducts a self-evaluation annually, enhanced by third-party facilitation when needed.
• The evaluation process results in the identification of concrete actions the board agrees to take within a specified period to enhance effectiveness through the achievement of specific milestones.
• The board's collective competencies map to the company's strategic and technical needs.
• The company's disclosures around the board evaluation process enhance trust in the board.

Ms. Pederson's report concludes with the following:

A highly effective board of directors is a great asset to a management team and a critical component of company success. Our experience finds that boards must deliberately manage the board effectiveness pillars to be certain they are working on mission-critical elements of the business and procuring the right information to drive decisions. Also, high-performing boards carefully address each element of the systemic governance framework to establish the use of an optimized approach that directly drives board value.

Questions for the board to consider:

• How does the board evaluate whether management is "living" the company's purpose and values as described in the company's code of business conduct and ethics?
• How does the board engage with management in rigorous ongoing analyses of material and mission-critical growth drivers, risks and opportunities?
• How can board materials evolve to include narrative stories that explain matters being presented to the board as well as practical dashboards, graphics, data, and key performance indicators?
• On mission-critical issues, how does the board diversify its information sources beyond management by engaging with independent advisors to broaden its perspective?
• Do the board's corporate governance guidelines provide clear standards for director qualifications, continued service, tenure, and removal?
• Has the board discussed using additional committees to address expanding board or committee roles and oversight responsibilities, particularly around risk, technology, cybersecurity, climate change, human capital management, and material ESG matters?
• Does the board calendar make sufficient time for board engagement with management, key investors and other stakeholders, and independent advisors?
• Is every director consistently prepared for board and committee meetings, as demonstrated by his or her engagement and contribution? And if not, how is that feedback provided?
• Is the board effectively managing and leveraging diversity in backgrounds and perspectives? Is there sufficient diversity in views to promote progress in the board's mission?

What are your recommendations for how to achieve enduring board effectiveness?

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.

How Corporate Boards Can Confront Crisis and Embrace Opportunity

As we enter into 2024, the world is experiencing conflicts in a multitude of countries and these conflicts are having an adverse effect on global trade, which in turn, impacts global financial markets. As EY, a consultancy, says in its report on how boards of American companies can confront crisis and embrace opportunity, "Dynamic global crises continue to challenge companies, with the escalation of conflict in the Middle East, the war in Ukraine, geopolitical complexities related to China, and an uneven global economy creating a sense of permanent crisis on a multitude of fronts." 

The multinational consultancy adds: "At the same time, exceptional growth opportunities seem at hand. Generative AI (GenAI) represents a groundbreaking leap in technology with the potential to increase productivity and transform work, business models and society. Further, the continuing energy transition demands a reframing of business strategy to mitigate risks and thrive in a low-carbon economic future."

Moreover, "In this context of crisis and opportunity, directors are deepening their engagement. They are guiding companies to build resilience by considering multiple alternative scenarios and carefully balancing discipline and transformation."

Below are the key findings of each chapter of the report with recommended actions for boards and questions a board should be asking (the recommended board actions and questions are copied verbatim):

CHAPTER 1: STAY AGILE AMID CONTINUED ECONOMIC UNCERTAINTY

The report's first chapter focuses on how to stay agile amid continued economic uncertainty. The chapter's key point is boards should enhance oversight and flexibility as uncertain economic conditions persist. "Global economic activity remains subdued heading into 2024, with rising geopolitical tensions and tightening financial conditions as key risks. As the year begins, companies can expect slower business and consumer spending, along with softer labor market conditions and still-elevated costs." Furthermore, "Companies must navigate an ever‑shifting landscape of geopolitical and economic uncertainty. To do so, they will need to build resilience and agility in their operations."

What boards should do in 2024:

• Embrace agility and oversee flexible strategic planning that incorporates dynamic multi-scenario planning. Boards have an opportunity to guide management, pressure-test plans, and assess multiple options for achieving strategic goals in the current operating environment. Directors should ask what economic, financial and customer demand scenarios have been considered and what the potential impacts are on financial performance, growth and strategy.
• Confirm how the board will receive timely updates about macroeconomic developments that could impact the company. The board is a strategic resource to the management team in preparing for different economic scenarios and thus needs timely and relevant information from experts beyond the management team to do this effectively. This information should directly inform scenario planning.
• Help management focus on the long term. This will be important as the company considers how to adapt to potential economic deceleration and various challenging geopolitical developments. For example, the board can oversee how productivity, training and efficiency gains can offset higher labor costs. The board can also encourage capital strategies that position the company to thrive as broader technology and sustainability trends continue to reshape the business environment.

Questions for the board to consider in order to enhance oversight and flexibility as uncertain economic conditions persist:

• How is the company planning for a range of economic scenarios, including those in which geopolitical developments keep inflation elevated, and potentially rising, for longer?
• How often does the board ask leadership: "What if we’re wrong?" How is the company considering what it would do differently if a low-probability, high-impact scenario was to emerge?
• What is the company doing to stress-test its balance sheet and develop and test a crisis playbook that gives company leaders comfort in their ability to manage through even the worst‑case scenario?
• How is the company developing a resilient strategy around pricing, capacity management and location, and distribution that is nimble enough to navigate a world where demand will ebb and flow more significantly than in the past few decades? How is scenario planning supporting that strategy?
• How is the company evaluating costs, investments and decisions in the context of its long-term strategy, especially regarding technology, talent and the energy transition?

CHAPTER 2: BALANCE DISCIPLINE AND TRANSFORMATION IN CAPITAL STRATEGY

Focusing on how to balance discipline and transformation in capital strategy, chapter two of the report discusses how to adapt strategic priorities to a slower-growth environment. According to EY, "A mantra for many leadership teams this year will be financial discipline. Growth at any cost has given way to investments that must show a clear path to profitability or value creation. Still, companies cannot afford to retrench." In addition, "Companies cannot afford to let financial caution prohibit necessary investments for long-term growth, such as those related to technology and sustainability."

What boards should do in 2024:

• Encourage accelerated investment for long-term growth and competitiveness. Boards must keep the long term in view for management so that companies do not miss out on innovations or avoid tough decisions that will be necessary to stay competitive in a future that will look very different from the past.
• Enable management to maximize profitability and position for business model transformation. Challenge how management is identifying opportunities for cost management, tracking the progress on investment decisions and considering how markets could evolve and impact the use of capital in existing and potential businesses. Probe how internal rationalization, cost cutting and divestitures can fund future transformation.
• Promote enhanced communication with investors about the company's capital strategy. Capital allocation can be a key area of focus for activist investors, and a bear market leaves companies more exposed at a time when investors are less forgiving. In an environment of heightened shareholder activism, boards can help challenge whether companies are doing enough to communicate the company's strategy narrative proactively with shareholders.

Questions for the board to consider to facilitate the balancing of discipline and transformation in capital strategy:

• How is the company optimizing its capital management and reducing direct and indirect costs through an era of continual change? How is it considering internal cost cutting as potential funding for ambitious transformation?
• How is the company investing to mitigate risk and create long‑term growth opportunity despite multiple headwinds? Is it maintaining the right balance of innovation and capital strength?
• How is the board defining its role as stewards of investor capital? Does that role include positioning the business to thrive as the world evolves?
• How is the company's capital investment strategy changing in areas such as digital and technology, people and skills, innovation and research and development (R&D), and sustainability? How are board committees coordinating their oversight of these matters?
• What types of transactions (e.g., M&A, divestment, new joint ventures or strategic alliances) is the company considering to achieve its strategic goals? Are those options explored at the board level or is the board presented only with management's decision?
• 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?

CHAPTER 3: EMBRACING CYBERSECURITY AND DATA PRIVACY AS STRATEGIC ADVANTAGES

The next chapter of the report addresses the importance of embracing cybersecurity and data privacy as strategic advantages. Emphasizing how companies should broaden cybersecurity and data privacy beyond compliance, the report points out that "While cybersecurity and data privacy are perennial concerns for boards, they include a complex set of always-evolving drivers, and background knowledge that can quickly stale. 2023 saw a variety of different changes in the cybersecurity landscape, such as the quick adoption of new technologies, new geopolitical influences, new regulatory requirements and increasing nation‑state bad actors." What is more, "A more complicated environment will likely cause many organizations to mature their cybersecurity oversight through 2024."

What boards should do in 2024:

• Reconsider whether cybersecurity oversight is structured the right way. The new SEC disclosure rules may be a good opportunity for the board to reconsider whether it is structured appropriately to oversee cybersecurity in the years ahead. To do so, it may consider adding (or removing) a focused committee, concentrating or distributing cyber expertise throughout the board, changing the cadence of cyber discussions, or otherwise altering the board agenda.
• Participate in complex cyber threat tabletop exercises. These can be done either separately or with management, and complex cyber exercises can be incorporated into the board calendar. These scenarios should be varied and dynamic. Although it may be unlikely that a specific scenario will be replayed in real life, the simulation can develop the board’s muscles for dealing with a challenging crisis; pressure-test existing playbooks, discussing policy such as whether the company will pay ransoms; and uncover opportunities to improve processes and procedures.
• Maintain a wide variety of voices in the boardroom. In addition to members of the cybersecurity team, directors may seek a variety of voices, ranging from operators and internal audit to HR and strategy, to understand the company's preparation that extends beyond threat and response to data privacy and ethical data usage. This can give insight into how the company’s cyber risk appetite is being applied and whether the cyber risk culture meets expectations. Further, complexity can be a barrier to effectively combating cyber threats. The board may ask management teams to consider how IT security systems can be simplified.

Questions for the board to consider to embrace cybersecurity and data privacy as strategic advantages:

• How has management adapted the cyber response playbook to the threat environment that continues to evolve?
• Have appropriate and meaningful cybersecurity and data privacy metrics been identified and provided to the board on a regular basis, and have dollar amounts been assigned to these risks?
• What is the state of the organization's cyber risk culture? How can the organization minimize employees' susceptibility to online manipulation and deceit?
• 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?
• How does the organization use data to build and maintain trust with stakeholders, such as employees, customers, suppliers and investors?
• What controls are in place for ethical usage of technology to promote stakeholder trust and data privacy?
• Has the board participated with management in one of its cyber breach simulations in the last year? How rigorous was the testing?
• 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?

CHAPTER 4: GUIDE RESPONSIBLE AND TRANSFORMATIVE INNOVATION AND TECHNOLOGY

The fourth chapter of EY's report addresses the importance of guiding responsible and transformative innovation and technology by enabling the company to innovate in a way that is both revolutionary and ethical. "GenAI is only one of many emerging technologies that is already impacting business in expected and unexpected ways. Other technologies and innovations include the metaverse, Internet of Things, Web3, and quantum computing. These advancements will transform the work organizations do and the environment in which they operate." The report further asserts that "GenAI's appeal puts pressure on management to take advantage of its potential for strategic advantage before their competitors do, or risk falling behind."

What boards should do in 2024:

• Strengthen management accountability for responsible AI. Boards are in a strong position to make sure that management teams are creating responsible AI policies that effectively manage the risks and capitalize on the opportunities available for the enterprise while keeping the company's values and purpose as a north star. It is not enough to require that policies are in place. Boards should go further to push management to ensure that employees adhere to such policies, that there is a mechanism to determine if they are not and that managers are quickly fixing problems.
• Embrace a range of perspectives and experiences in the boardroom. Directors with a wide variety of professional and lived experience are increasingly important to help drive innovation and govern emerging technology. This diversity enables the board to better identify nontraditional threats and encourage management teams to responsibly leverage new technologies and innovations. Further, a variety of perspectives from within the boardroom fosters an environment that facilities robust discussion, allowing key assumptions and conclusions in strategy, operations and other areas to undergo thorough pressure testing.
• Gain visibility into external trends and internal capabilities. An intentional approach to understanding the trends likely to impact the company over the long term is critical for a "future‑back" approach to strategy. This strategy approach envisions possible future scenarios and then works backward to identify the strategic objectives in order to ensure the company is viable in that future. Further, working to understand the company's internal capabilities by going beyond C-suite presentations through hands-on experience and R&D visits can help the board better evaluate how management is placing bets across the enterprise.
• Build agility into the decision-making process. The pace of innovation is fast and may only get faster. A traditional board meeting cadence — four to six full board and committee meetings a year — may be insufficient to support the needs of the company. Boards should work with their management teams to consider a more flexible trigger-based approach to strategic planning that entails a more consistent evaluation of the future. At the same time, boards may gain value by looking inward to consider the current structure for overseeing innovation and emerging technology. Confirming that the board’s structure remains fit for purpose is critical to making sure the board does its best to support innovation and emerging technology.
• Investigate innovation in the boardroom. The board may start to consider the ways in which innovations such as GenAI can improve its own work. GenAI may be able to support boards by summarizing large and complex board materials, more efficiently schedule time for board and committee meetings, and provide background and learning curriculum for new and emerging boardroom topics.

Questions for the board to consider to enable the company to innovate in a way that is both revolutionary and ethical:

• What is the company's path to value with GenAI and other technologies? How are the risks identified and managed?
• What policies has the company implemented to confirm that GenAI is used responsibly? How does management know they are working?
• 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 but 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, including learning through hand-on demonstration and experience? How will companies create an ecosystem in which AI and data protection coexist and create synergies to generate a better value proposition for users and customers?

CHAPTER 5: ENABLE A PEOPLE-CENTRIC WORKFORCE STRATEGY

Chapter five of centers on enabling a people-centric workforce strategy by guiding talent engagement and cultivation amid a rebalancing of power and a reimagining of work. "The talent landscape is constantly being disrupted by a combination of cyclical and structural forces. This has led to a divergence in perspectives between employers and employees." I agree that "Employers may be underestimating the fluidity of the labor market." As the report explains: "While 57% of employers believe that a more challenging economic climate would reduce employees' likelihood of seeking new jobs, the survey found that a significant 34% of employees expressed their willingness to leave their current jobs within the next 12 months. This highlights the importance of talent availability, acquisition and retention. For directors who view talent as a top priority in 2024, 77% said these topics were most important."

What boards should do in 2024:

• Seek a deeper view into employee sentiment and perspectives by hearing from employees more directly. Boards should actively engage with the chief human resources officer (CHRO) and seek direct input through tools such as pulse surveys and interactions with front-line employees. This approach enables boards to hear employees' voices directly and fosters a culture of inclusivity and engagement.
• Guide management to put people first in workforce strategy and cultivate a culture of trust. This involves boards evaluating the leadership team and their incentives to energize and inspire employees, ultimately gaining their trust. Additionally, boards should oversee how management implements workforce re‑skilling and training initiatives to prepare the workforce for future challenges, while actively involving employees as partners in that transformative journey.
• Enhance stakeholder communications around compensation committees' oversight of human capital matters. With potential new SEC rules and heightened attention on high-profile strikes, stakeholders will scrutinize the board’s role in governing the talent agenda. Investors will seek to understand whether the compensation committee or full board has a meaningful impact on shaping a resilient talent strategy.

Questions for the board to consider to guide talent engagement and cultivation amid a rebalancing of power and a reimagining of work:

• How does the company's talent strategy advance its overall strategy? What changes have been made to other elements of the business to advance the talent strategy?
• How is the company identifying and addressing employees' chief areas of concern?
• How is the company's leadership team earning trust with employees? Do the company's employees feel connected, inspired and well-informed at work? Do they feel that leadership cares about them as people?
• How often is the board engaging directly with the CHRO or equivalent and what is the substance of those discussions? How is the board getting a direct line of sight into employee perspectives below the executive level?
• What human capital management metrics are the board or compensation committee reviewing? How do those metrics align with the long-term talent strategy, and what narrative is the company communicating to stakeholders about its talent agenda?
• 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 key areas such as technology and sustainability?
• How is the company making the use of AI compatible with talent development so that the company’s strategy can adapt quickly to the constantly changing business ecosystem?
• How is the company approaching in-office, fully remote or hybrid working models and maximizing the human experience of work in its talent strategy? How is the board getting insight into employee sentiment related to hybrid and remote working across different job functions, geography, age and gender?

CHAPTER 6: KEEP OTHER FOCUS AREAS ON THE BOARD AGENDA 

With the thesis of balancing top priorities with additional imperatives, being careful to not overwhelm the board agenda, the report's sixth chapter addresses the importance of keeping other focus areas on the board agenda. "The board's priorities for 2024 are not the only areas of risk and opportunity that boards will need to address this year. There are other business imperatives to consider in the year ahead" such as keeping pace with regulatory developments, guiding political considerations, overseeing supply chains as strategic assets, and addressing climate change and environmental stewardship.

Questions for the board to consider 2024:

• 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 management taking prudent action now to prepare for future regulation 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 networks tuned to the new geostrategic environment?
• Does the company view climate- and nature-related 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 the 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 used to explore multiple plausible futures and their potential business implications systematically?

GOING FORWARD IN 2024: ENHANCING THE BOARD'S STRATEGIC VALUE

EY concludes its report noting that "In 2024, boards will need to enhance their strategic value by enabling resilience through discipline and transformation. They must guide management to balance short-term demands and long-term growth and support the organization as it confronts crisis and embraces opportunity."

Moreover, "While cyclical changes such as inflation and consumer spending require attention and may present tactical opportunities, it is structural changes such as the GenAI revolution, geopolitical fragmentation and the energy transition that are significantly impacting strategy and raising the stakes for businesses and society. Effective boards will provide valuable insights, effective challenge and leadership to enable companies to make agile decisions aligned with their values in this turbulent environment."

In the report's introduction, EY notes that its "2024 board priorities relate to near-term issues (e.g., economic uncertainty and the cost of capital) as well as longer-term priorities (e.g., innovation and workforce development)." I agree that "A crucial role of the board this year will be guiding management in balancing what is urgent to address now with what is vital to invest in for the future." How is your business balancing the urgent matters that need address now with investing in vital initiatives for a sustainable future?

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.

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.

A Framework for Improving ESG Reporting in the Mobile Industry

In my previous post about a report published by GSMA on how the mobile industry is impacting the United Nations' Sustainable Development Goals (SDGs), I referenced a framework, ESG Metrics for Mobile, developed by GSMA alongside EY, a consultancy, and the Yale Center for Business and the Environment. Several readers sent comments asking for additional information about the framework, which is a first-of-its-kind mobile sector ESG reporting framework featuring ten industry-specific key performance indicators (KPIs). Featuring ten industry-specific KPIs, the framework covers a range of key material topics for the sector, from energy consumption and waste reduction to digital inclusion and data protection. The common metrics are designed to simplify and harmonize environmental, social, and governance (ESG) disclosures and complement universal reporting, by adding a crucial industry-specific lens.

A white paper authored by representatives from EY explains, "There is a critical need for more effective and consistent approaches to measuring and communicating ESG performance." Moreover, "Sustainability is one of the defining issues of our generation. Consumers, employees and regulators are increasingly vocal regarding their expectations for companies to act responsibly and to demonstrate how they create value to society."

The report also notes that "EY research has found that 90 percent of investors attach greater importance to companies' ESG performance when it comes to their investment strategy and decision making than they did before the global pandemic. Mobile operators recognize that, by placing greater focus on their ESG performance, they can build stronger relationships with stakeholders and create financial value."

The report's key findings include:

• Mobile operators currently report on most of the industry's key topics, but not always in a consistent way
• EY's proposed industry KPIs are designed to enhance consistency and impact
• The mobile industry can use the proposed KPIs to measure and improve ESG performance
• Attitudes towards ESG are shifting
• Mobile operators are uniquely placed to accelerate progress on a range of ESG issues
• Measuring and communicating ESG performance is critical

During the consultation process, five criteria were used to define the minimum requirements that a sector KPI should meet.

1. Meaningful for stakeholders: The KPI will influence the assessments and decisions of external stakeholders, including investors.
2. Decision-useful: The KPI will influence internal decision making and convey information to the mobile operator that can substantively enhance the company's ability to create value.
3. Comparable: The KPI will enable meaningful peer-to-peer comparisons across geographies, and the definitions and calculation methods are transferable to most companies.
4. Feasible: The KPI can be implemented by the company. It is simple and short, aligns to existing standards where possible, and uses standardized measurements. The underlying methods and approaches are robust and follow accepted approaches.
5. Best indicator: For the given topic, the KPI represents the best indicator of the company's ability to create value in the short, medium and long term.

In reference to the image on the right presenting the mobile industry's framework, the report explains: "Taken together, the universal and industry-specific KPIs will help create less burdensome and more meaningful data collection and reporting processes, and provide greater consistency in the information disclosed about operators' ESG performance." What is more, "This will enable operators to take a proactive position in providing relevant material disclosures, and supply the tools and setting for data preparers and data users to have a more enhanced and constructive dialogue on ESG performance."

In addressing the next steps for mobile operators and other stakeholders, the report presents "three critical steps that mobile operators and their stakeholders can take to ensure that the industry ESG framework accelerates performance across the mobile industry and beyond":

1. Align company's leadership behind the ESG KPIs. "ESG reporting should be owned by the Board, CEO and CFO — with relevant inputs from functional teams. There should be clarity around what ESG-related transformation means for corporate strategy, how investments in sustainability contribute to financial performance, and how the KPIs can help organizations measure success."
2. Raise awareness of the framework with the investment community and other external stakeholders. "Open and ongoing conversations between operators and investors will also be a critical step to refining and validating the KPIs. Operators can help investors understand which ESG issues are most material to their organization and be able to frame ESG discussions in the context of financial performance. These dialogues should also ensure that the KPIs provide the information that investors need to make assessments of the company’s long-term value. At the same time, socializing the KPIs with policymakers, partners or customers in other industry verticals can also pave the way for better alignment on cross-sector enablement metrics in years to come."
3. Adopt the metrics in future reporting, measure your performance and deliver improvements. "Operators can begin to test their ability to report against the KPIs and incorporating them into their ESG reporting cycles. This will generate the evidence, insights and experience needed to further refine the KPIs and draw better, more compelling links between ESG scores, stakeholder value and financial performance. At all stages, operators should ensure they take action where needed — whether that relates to improving KPIs themselves, or reorienting systems and processes to deliver more relevant and timely information that avoids duplication. Measuring sustainability performance is the critical step operators should take to move from ambition and strategy towards successful execution."

As operators adopt this new ESG framework, the metrics will provide stakeholders with a deeper understanding of the industry, and where its most material impacts and value are generated.

Do you support the proposed framework for improving ESG reporting in the mobile industry? Are there aspects of the framework that can be applied to other industries?

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.

Questions Boards Should Ask to Guide Cybersecurity Preparedness

"Boards are demanding more oversight of cybersecurity," says EY, a consultancy, in a report on how boards can help the companies they govern be better prepared to prevent cyber attacks. After surveying "411 CEOs, chief information officers (CIOs) and other cybersecurity decision-makers about their companies' use of information security solutions," the report reveals "that simple actions taken now can reap substantial rewards later." The report adds that "[t]hese lessons," which are outlined below, "have emerged from those who have experienced major breaches."

1. Focus on "zero trust." "Zero trust security is not a single technology, but a holistic approach to security, incorporating different cyber principles across people, process and technology. The basis of the concept is the assumption that there are threat actors within and outside of organizations, so no users or machines should be trusted. All users and devices (both inside and outside of the organization) are authenticated, authorized and continuously validated for security configurations and context before accessing applications and data."
2. Educate and involve your board now. "Not surprisingly, boards of directors are increasingly interested in preventing data breaches and determining how to prioritize cybersecurity needs. Executives that have experienced a data breach say the experience has taught them to involve many more stakeholders in cybersecurity decisions, including boards. Companies should proactively create a board-level executive dashboard, while simultaneously briefing the board about cybersecurity issues at least once per year."
3. Reinforce the role of the CISO as a strategic partner to the business. "During the pandemic, every organization had to adapt to a new way of working. However, the speed of change came with a price. Seventy-five percent of companies saw increases in the number of disruptive attacks during the pandemic. In this sense, many companies were forced to adapt to a different cyber risk profile just like an organization has to do after experiencing a breach. CISOs had and still have an opportunity to reinforce their value proposition with the business. With the onset of the pandemic, 55% of cybersecurity leaders believed this gave them an opportunity to position themselves as strategic partners to the business. Dave Burg, EY Americas Cybersecurity Leader, noted that 'I know of many security officers who were viewed as superstars, and we want those superstars to be brought to the front of innovation.'"
4. Assess usage of managed security service providers. Keeping up with the latest security technologies and evaluating threats are the most challenging pain points for today's CISOs. Companies that have recently experienced a breach are more likely to outsource cybersecurity responsibilities after the breach. By starting the time-consuming process of reviewing outsourcing options and vendor capabilities prior to a breach, companies can develop the best security architecture and posture."
5. Spend now, save later. "According to the survey, companies that have recently experienced a breach expect to spend more across all security domains, with vulnerability assessments and access controls expected to see the largest budget increases. To protect themselves from today's sophisticated attacks, companies must bolster their cybersecurity capabilities or outsource them to external vendors. Many executives make decisions to bolster capabilities to not only prevent attacks, but also to mitigate the damage and shorten the recovery time."

The report importantly notes that "In today's environment, corporate boards are increasingly held accountable for cybersecurity and resiliency. Boards may want to focus on the governance of their enterprise-wide cyber programs, while the highly technical CISO focuses on the risk management aspects." Moreover, "To help facilitate productive discussions, EY US has developed the following key questions about effective cybersecurity oversight that boards can refer to during an intrusion."

1. Was the organization affected by this intrusion?

• If yes, how is the organization mitigating and responding to the vulnerabilities identified?
• If not, what proactive measures were deployed to prevent a similar intrusion?

2. What is the potential impact of the intrusion?

• Which areas of the network, including data assets, were compromised?
• What is the total risk exposure, including financial, regulatory, reputational and operational impacts?
• Has an independent third party assessed the network to analyze the extent of the impact?

3. How effective was the response plan?

• What gaps were identified in the investigation, containment, eradication and recovery processes?
• Does the company have appropriate insurance coverage? Has the insurance provider been engaged?
• What lessons were learned?

4. Are third-party and supplier ecosystems secure?

• Have any of the company’s third parties and fourth parties been compromised?
• Do any of those parties have access to the network?

5. Is the company focused on preventing and responding to future compromises?

• What is the efficacy of the company’s current cyber risk management efforts? Should the company’s risk appetite be re-evaluated?
• How does the company become more resilient to future incidents?
• Where should the next cybersecurity dollars be invested based on the evolving threat landscape?
• Has the company built cyber diligence into its acquisition and integration plans?

Based on regular discussions I have with cybersecurity professionals about how their role of keeping their organization's IT systems secure is an arduous battle that goes on each and every day throughout the year, I appreciate the report's conclusion:

Unlike many corporate functions, cybersecurity departments don't have an off season or a period of reduced activity and demand. For cybersecurity professionals, every day is a race against time and resources, and a balance of competing priorities. Corporate cybersecurity executives are faced with a choice — take simple steps now to lessen the impact of future breaches or continue operating in a reactive mode and responding to daily demands and possibly facing the fallout from inevitable breaches.

As an article by The Economist points out that: "Corporate boards need to have a stronger grasp of the threat levels. As one former cyber-spook says, they need not just gender and racial diversity but technological diversity, too, in order to grill the company's techies on cyber-defenses. Furthermore, they need to recognize cyber-war as one of the growing number of geopolitical risks that firms face."

Do you agree with the findings of EY's survey? What questions should boards ask to guide cybersecurity preparedness?

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.

Report Presents Relevant and Timely Questions Directors Should Ask in This New Era

The coronavirus pandemic has presented a company's board of directors with unforeseen challenges that tests long-held principals in governance and leadership. The balance of mitigating risks while keeping an eye of corporate growth will be a challenge for directors in this new era. Taking a philosophical approach to business strategy throughout my professional career, I support the following notion made by EY, a multinational professional services firm: "We believe that better questions lead to better answers and a better working world. Likewise, we believe that a board's most effective tool is asking compelling questions. These questions can lead to better governance and organizations that drive value for all stakeholders."

Produced annually by the EY Center for Board Matters, the 2022 report presents a list of relevant and timely questions, segmented by four themes, for a company's board of directors to consider:

Theme 1: Strategy and innovation - Strategy that positions companies to innovate and differentiate for a sustainable future

1. How is the company rethinking its definition of "long term" to maximize value while also focusing on near-term risks and opportunities? Is the strategy appropriately focused not only on where the company is going, but where it can go?
2. Are material environmental, social and governance (ESG) issues considered in the company's long-term strategic planning? How do the company's business model, practices, products, and services address urgent environmental and social challenges as we move toward a more inclusive and sustainable future?
3. What data and metrics are being used to assess the health and vibrancy of the organization's culture and its alignment with strategy? Is the culture appropriate to inspire and enable innovation?
4. Is the company's capital allocation aligned with the necessities of its long-term strategy? How is the company addressing barriers toward optimal allocation?
5. Does the board have the appropriate governance process to oversee strategic investments that seed innovation to change the game? How is it supporting the acceleration of idea generation, trialing and assessment while also encouraging appropriate risk-taking?
6. Has management appropriately considered partnerships, joint ventures and alliances, along with M&A, to accelerate the strategy, particularly with longer-term adjacent and transformational opportunities?
7. Are newer and innovative technologies, including digital platforms and cryptocurrency solutions, appropriately leveraged to accelerate goals and objectives? How can these technologies accelerate the speed to market and enhance virtual collaboration and customer engagement?
8. What is the company's transition plan for thriving in a net-zero future? Is that plan integrated with the company strategy? Does it include specific short-, medium-and long-term greenhouse gas reduction targets and related decarbonization initiatives? How is the company preparing for additional climate-related disclosure requirements?
9. How is the company investing in protecting and restoring the natural ecosystems and biodiversity on which its business relies?
10. Does the board understand the company's supply chain constraints? Is the board confident that the supply network is flexible and agile amid continued global supply chain challenges? How is it addressing increased calls from stakeholders for sustainability and less waste?

Theme 2: Talent oversight - Broader oversight of culture and talent that is prepared for the transforming labor market

1. Do scenario analyses consider an appropriate range of extreme and even improbable scenarios, including existential threats? Do they incorporate the potential compounding effects of various risks, such as supply chain disruption, talent acquisition and retention, inflation, future interest rates and an evolving tax landscape?
2. Are contingency and response plans related to material and high-impact risks, such as cybersecurity breaches and natural disasters, periodically simulated and reviewed with the board?
3. How is the company revisiting and adapting its risk management strategy and management's approach to the three lines model in response to potential changes in the external and internal environment, changes in the strategy and risk landscape, and the company's operating model?
4. Has the board considered how the organization's risk assessment capabilities are evolving, including how analytics, artificial intelligence and other emerging technologies can be used to review and validate data and information to unearth insights into enterprise risks and opportunities?
5. How has the company's cybersecurity risk management program evolved to address the current environment in which attackers are targeting a larger surface area and using increasingly unpredictable tactics? How are cybersecurity and data privacy considerations proactively integrated into all major strategy or tactical decisions, such as transactions, alliances, new products or services, and technology upgrades?
6. What types of data is the organization collecting from its customers and other stakeholders to better assess the trust, risks and opportunities related to changing preferences and needs? How is the collection occurring?
7. How is the company scanning and assessing geopolitical developments, including a rapidly changing trade and regulatory landscape and governments moving to a more interventionist policy position?
8. What is the company doing to address material social risks across its value chain, including the treatment of employees and suppliers' human rights practices and impacts on customers and the communities in which it operates?
9. How is the company assessing the impact of physical and transition climate risks on products and services, supply chains and operations that can materially affect operating costs and revenues across the enterprise?
10. Has the organization's tax planning strategy been reevaluated to address potential tax policy changes, as well as impacts arising from potential shifts in the supply chain and capitalization? Has the organization considered growing stakeholder interest in tax transparency and potential related reputational impacts?
11. Does the board understand and approve the company's data privacy and data usage policy? How is customer and employee data use managed? Are social surveillance algorithms reviewed for bias? Is data protection considered beyond cybersecurity protection?

Theme 3: Risk and resiliency - Risk management that enables resiliency amid new and evolving challenges

1. As the nature of work and employment further transforms, how will the organization adapt its talent functions to realize its strategy? Does the board spend the same amount of time with the chief human resources officer (CHRO) discussing data and metrics to assess the health and welfare of the workforce as it does with the CFO reviewing and assessing the overall financial health and stability?
2. To attract and retain talent in a hypercompetitive labor market, how is the organization implementing plans to address calls for better pay and benefits, including flexibility, the opportunity to work from anywhere, programs to enhance well-being, and funding for training and educational advancement?
3. How have the desired skills and behaviors for the organization's leaders evolved in response to the events of the last two years, and how has the board's succession planning and oversight of talent development changed in response?
4. Given that more than half of employees say they would leave their job if flexibility in their schedule and work location is not extended after the pandemic, has the organization considered how to make flexibility integral to the company's human capital strategy?
5. How is the company seizing strategic opportunities to tap into larger talent pools, diversify across numerous dimensions and expand working hours across time zones, while being mindful of work location, regulatory and legislative challenges?
6. Is the board comfortable with how the organization is nurturing its existing and future talent pools (e.g., reskilling and upskilling, educational alliances) to position the company to meet current requirements, address enterprise risks and prepare for continued strategic pivots?
7. How is company leadership enabling cross-functional collaboration and seeking input from a broader set of internal constituencies to support an inclusive culture, enhance engagement and spur innovation? How are these efforts measured?
8. Are there any efforts to identify and address disconnects between how management views the employee experience and the employee's actual experience? Are employee engagement scores, periodic pulse checks, summaries of exit and onboarding interviews, and social media data routinely reviewed?
9. With continued virtual work, how is the company addressing any impacts on employee engagement, inclusion and career development?
10. How is the company embedding diversity and inclusion into its workplace policies and human capital management programs throughout all steps in the employee life cycle to enable equitable opportunities, advancement and compensation?

Theme 4: Dynamic governance - Dynamic governance that addresses expanded and changing oversight requirements

1. How is the board adopting a continual learning mindset and strengthening its education program? Is the program sufficiently tailored to the company's and individual board member's needs, seeking diverse views from inside and outside the company that allow for challenges to status quo thinking?
2. How can the board's structure be refreshed to be more agile, future-focused and aligned to the risks and opportunities on the road ahead? Is the board considering the use of ad hoc committees made up of directors, management and third parties to address specific strategic issues?
3. How is the compensation committee evolving its charter to address oversight of broader human capital issues? How does the board hold senior management accountable for progress against related goals via incentive plans and other reward mechanisms? How is the company preparing for ongoing human capital disclosure requirements?
4. How is the company refreshing its investor engagement strategy to be more efficient and productive? Is it considering new engagement approaches (e.g., more collaborative engagement via working groups or investor days)? Is it leveraging the proxy statement and other disclosures as communication tools?
5. How is the board thinking like an activist in considering and proactively addressing the company's operating vulnerabilities? How is the board obtaining an unfiltered view of shareholder feedback on the company's strategy and pace of performance? Do select individual board members have direct dialogue with shareholders to understand their priorities?
6. Are information flows to the board being appropriately challenged to include more forward-looking and predictive insights, coverage of emerging risks, external perspectives, and corroborating data from third parties to keep pace with the evolving market, economic and geopolitical developments? Is a consent agenda used to maximize board discussion of strategic initiatives?
7. How is the board expanding its director search to maximize diversity and broaden board competencies in critical areas such as technology, human capital management, cybersecurity, and sustainability, and how are those individuals onboarded to set them up for success?
8. With increased board diversity, what changes to its protocols are being made to leverage diversity of thought, improve decision-making and create an inclusive boardroom?
9. Is the board prepared for increased accountability as ESG matters become a multi-stakeholder priority and investors increasingly embrace proxy votes against directors as their most effective tool to accelerate progress on ESG matters?
10. With growing scrutiny of sustainability reporting and stakeholder concerns around greenwashing, how is the board — particularly the audit committee — overseeing nonfinancial disclosures made in regulatory filings, sustainability reports, analyst calls and other mediums? Are internal or external assurance procedures applied to material assertions and data?
11. Is the company progressively reporting on human, customer and societal value to attract capital and meet the increasing demand of stakeholders for consistent and comparable ESG and other nonfinancial‑related data that aligns with evolving external frameworks?
12. What is the board's policy for timely review of corporate political and lobbying expenditures and any public political positions taken by senior executives? How is the board assessing the alignment of those expenditures and positions with the company's values, commitments and strategy?
13. Could the board create more effective meeting agendas and protocols (e.g., consent agendas) to increase director engagement on priority matters? Can virtual sessions augment and enhance traditional in-person meetings?

The report insightfully notes that companies will "continue to refresh their strategy to strengthen agility, resiliency and sustainability and leverage innovative opportunities that can accelerate their performance over the long term." Importantly, "Trajectories of companies that are thriving and leaning into this strategic reset are diverging rapidly from those that are merely surviving."

Moreover, "Boards have both the opportunity and the responsibility to help guide companies in this new era. They can support their companies in incorporating human and natural capital as part of business decisions and strategy, and harness risks as opportunities for innovation and a competitive advantage." I concur that this cannot "be achieved through a historical governance model. Boards should continue their own transformation to a new agile and dynamic form of governance and continuously challenge their composition, committee structure, agendas, and ways of working to position their organizations to thrive in the long term."

I appreciate how EY's report provides directors with insights and questions to consider as they engage with management on a variety of complex boardroom issues. What questions do you think directors should be asking to help companies in this new era?

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.

EY's Six Priorities for Boards in 2021

Many will agree with this assertion: "Following a year of global upheaval, organizations are re-evaluating every aspect of their business." Produced by the EY Center for Board Matters, the report, which lists six priorities corporate boards of directors in 2021, further says "companies and boards will face an acceleration of existing challenges" in the coming year "and be compelled to address how they are building resilience and creating sustainable value in a rapidly changing business environment."

I have published posts about EY's recommended priorities for boards for previous years. Whether serving on a board of a company that is publicly-traded or privately-held, I appreciate that this year's report recommends that when evaluating a company's existing business model, the "strategy should be inclusive of investments in strategic competencies to meet material stakeholder needs and future expectations, including those related to environmental, social and governance (ESG) matters."

Not only did the business disruption caused by the coronavirus pandemic remind corporate leaders of the important role ESG has on a company's culture and relations with its investors and customers, but the events of past year serve as a reminder that a company's most valuable asset is its workforce. The report encouragingly notes: "Boards have an opportunity to help guide workforce strategy to create competitive advantage and long-term value, and this requires the right information. This involves making the chief human resources officer (CHRO) a central board resource, regularly reviewing well-defined and robust metrics for human capital and culture intelligence, and finding opportunities to bring the employee perspective into the boardroom."

Therefore, "With increased investor scrutiny and stakeholder considerations, boards will be well served to focus on the following priorities in 2021."

1. Overseeing strategy to create long-term value

"In today's stakeholder-focused business environment, it is imperative that companies define both financial and nonfinancial value drivers and include them in strategy-setting as they consider the needs of investors, employees, consumers, society and other key stakeholders," explains the report. "Longer-term assumptions within the strategy should be developed using internal and external sources of information on megatrends, investment flows by venture capital and private equity entities, along with monitoring merger and acquisition, alliance and joint venture activity. Traditional sector and adjacent construct analyses along with external risk intelligence can provide early indicators of emerging opportunities and risks."

In addition, "Management should integrate strategy and culture with the company's enterprise risk management process and provide the board with timely updates related to strategic opportunities and risks."

The report importantly proposes that "the board and management should collectively challenge whether they have the appropriate governance processes to enable the timely review and implementation of a robust strategy across the short-mid-, and long-term time horizons. A long-term value dashboard that includes metrics to gauge financial, human, consumer and societal value should be reviewed regularly by the board and monitored by management to ensure metric credibility. Board time should also be evaluated along with the potential use of a committee or an ad hoc committee given the need to continuously review strategic assumptions over a longer term."

Key actions for directors to take in 2021:

• Balance the board's oversight of strategy and investments over the short, medium and longer terms to sustain long-term value.
• Obtain an appropriate mix of internal and external data and information to validate key assumptions and determine strategic pivots.
• Integrate ESG opportunities and risks into strategy frameworks and decisions.
• As strategy shifts, evaluate that the culture has been redefined to incorporate new behaviors required to drive the strategy over the long term.
• Create a long-term value dashboard with regular briefings to the board to ensure shareholder value improvement manifests from a balanced focus on financial, human, consumer and societal value drivers.

2. Promoting enterprise resiliency in the face of uncertainty

"Board members are playing a pivotal role in helping management adapt their organizations to the world beyond the pandemic and overseeing how resiliency is built into all aspects of the business."

Key actions for directors to take in 2021:

• Set aside more time on board agendas to challenge assumptions, review contingency plans and verify that management is incorporating low-risk/high-impact scenarios into its ERM frameworks and strategy.
• Analyze megatrends and identify key management and external advisors to regularly report to the board on material business environment developments and data points to continuously improve oversight of strategy and risk.
• Turn emerging risks into strategic value by taking a balanced approach to risk management across the three dimensions of risk: downside, upside and outside, with a greater focus on upside and outside risks.
• Review key performance indicators developed by management to measure key risks and opportunities and assess the value of material intangible assets — such as human capital and culture.
• Re-evaluate risk oversight practices and related structures to assess whether board or committee oversight changes would enhance oversight.
• Review management's conclusions and effectiveness following postmortems regarding corporate responses to the pandemic, social justice movements and other material economic and business impacts in 2020.

3. Focusing on workforce transformation and new ways of working

"Historically, many boards limited their talent oversight responsibilities to C-suite succession planning and development. Today's leading boards recognize human capital as a key driver of long-term value."

Key actions for directors to take in 2021:

• Review the board's approach to overseeing strategic workforce issues, including how related committee responsibilities are allocated (e.g., succession planning, human capital initiatives).
• Make the CHRO a central and strategic resource to the board by aligning their participation to strategy, business and disclosure discussions.
• Regularly review a comprehensive set of workforce and culture-related metrics, understanding how they are being collected, measured and controlled.
• Align decision-making related to the human capital strategy with the company’s purpose, culture and values.
• Consider how the company's investments in reskilling workers or recruiting new employees are meeting current and future skills gaps and addressing innovation.
• Assess the quality and consistency of the company’s human capital disclosures across various communication outlets and challenge how to optimize the impact on the company's brand and reputation, including with prospective employees and other key stakeholders.

4. Leading on diversity, equity and inclusion

"Making real progress on diversity, equity and inclusion (DEI) will be one of the hallmarks of 2021 as leaders implement significant changes to their recruitment and management processes and boards hold their management teams and themselves accountable."

Key actions for directors to take in 2021:

• Work with management to define and determine how DEI can help drive value for the company.
• Challenge how DEI considerations are embedded in the company's human capital management programs throughout all steps in the employee life cycle.
• Understand how the company’s human capital management programs enable equitable opportunity, advancement and compensation.
• Consider how executive incentive pay could be more directly tied to the achievement of DEI goals.
• Assess how the board’s composition and director nomination process reflect the company's commitments to DEI.
• Include DEI metrics as part of the company's long-term value dashboard for credible reporting and updates to the board

5. Guiding an ESG strategy that drives stakeholder engagement and value

"A sustainable-investing surge is underway. Driven by many forces, such as investor demand and increasing recognition that ESG factors can be financially beneficial, record-setting inflows are going to companies deploying ESG investing strategies, and significant growth in ESG-branded funds points to continued momentum."

Key actions for directors to take in 2021:

• Capitalize on ESG investing and stewardship trends.
• Understand the ESG ecosystem and developments impacting stakeholder expectations.
• Guide ESG strategy development based on a materiality assessment and oversee the identification of ESG metrics and goal setting.
• Support the integration of ESG with broader strategy and ERM.
• Consider how the company tells its ESG story through various channels and confirm that messaging is consistent and data quality is validated.

6. Challenging board composition and effectiveness

"Throughout 2021, boards should continue to enhance their own effectiveness. Board competencies, practices and committee structure and responsibilities can be continually improved to meet ongoing and emerging challenges, including the impacts of COVID-19."

Key actions for directors to take in 2021:

• Confirm the board is receiving the information it needs from a variety of sources to keep pace with external developments and challenge status quo thinking.
• Assess the board's expertise and diversity against rapidly evolving strategic opportunities and risks and stakeholder expectations. Develop individual and collective learning opportunities to enable directors to stay on top of current trends and leading practices.
• Challenge whether board and committee meeting frequency, length, format and security remain fit for purpose in a continued virtual environment.
• Contemplate using a third party to provide objectivity and facilitate or improve the board evaluation process and actionable outcomes.
• Promote ongoing board evaluation beyond the formal annual process, such as making time for reflection on performance during board and committee meetings or quarterly executive sessions.
• Enhance communications to stakeholders to build confidence in a time of uncertainty.

While very few of us predicted that the world would experience anything like the coronavirus pandemic, which has gripped the global economy in 2020, the pandemic serves as one of many external risks that may impact a company's operations and financial performance. Crises like the current pandemic or the Great Recession that occurred between 2007 and 2009 provides an opportunity for boards to reevaluate how they run the companies they serve. I encourage directors to use EY's report as a tool to help boards serve their role prudently and effectively.

Do you agree with the six board priorities?

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.