Business

How to thrive when uncertainty becomes the new norm for governance

There is a fundamental shift in the nature and focus of governance globally as boards adapt to navigating a complex and uncertain external environment.

There is a fundamental shift in the nature and focus of governance globally as boards adapt to navigating a complex and uncertain external environment. Image: Christina/Unsplash

Anna Marks
Global Chair, Deloitte
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This article is part of: World Economic Forum Annual Meeting
  • There is a fundamental shift in the nature and focus of governance globally as boards adapt to navigating a complex and uncertain external environment.
  • Boards are negotiating major external factors and rapid technological advancement, while trying to stay on top of ESG.
  • But, while there are no straightforward paths, there are logical steps and considerations to help address the complexity of governing through constant change and disruption, as explained here.

If there is one overarching lesson businesses can take from recent global events, it is arguably that disruption is here to stay and uncertainty may well be the new normal.

Demands on boards continue to remain high as geopolitical instability, global economic uncertainty, evolving stakeholder expectations and the accelerated pace of technological advances continue to impact business operations and strategies with increasing frequency and in a highly interconnected way. Against this backdrop, my conversations with chairs and board members across various industries, regions and sectors, lead me to believe that there is a fundamental shift in the nature and focus of governance globally, as boards adapt to navigating a complex and uncertain external environment.

In addition, there is increasing concern that other strategically important priorities and boardroom topics, such as organizational purpose, culture, talent strategies and climate, could slip down – or even off – the agenda given the urgency to address many of the pressing global events and trends.

So, how can chairs and their boards balance their near- and long-term priorities to govern effectively in this environment? By concentrating on having the right capabilities and diversity, alongside the appropriate agenda, governance structures and balance of short- and long-term focus, boards can help protect their organizations from risk and be a true value-driver by providing the executive team with support and challenge in equal measure.

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Governance considerations in the face of global external factors

The prevalence of these major external factors and evolving political environments can each impact businesses across a range of aspects, such as energy security, supply chain disruption, workforce safety and escalating costs.

Many boards are approaching these challenges by revisiting the oversight and support they provide to management, in particular regarding their focus on scenario planning to consider longer-term impacts, analysis of those impacts across each aspect of the organization and resulting actions.

These are complex considerations that require time, effort and skill and are activities vital to assessing and protecting the resilience and success of a business – a core role of the board.

Navigating rapid technological advancement

Many board members and chairs acknowledge that the fast pace of the technology revolution – in particular, the impact of Generative AI (GenAI) and, equally, the threats posed by cyber-attacks – are likely to have a transformative impact on work and business in the coming months and years.

The debates regarding the ethical implications of emerging technology, as well as trustworthy tech, are also intensifying – boards and executives are still learning the key considerations at play.

Boards and management should play a role in evaluating the wider impact of emerging tech on business strategy, operating models (including workforce strategies), resilience and investments. They should examine whether the right skills and capabilities are present in the boardroom to help empower better decision-making and risk management and help steer their organizations through dynamic business landscapes.

Using frameworks, such as those developed by the Deloitte AI Institute, to assist organizations in developing ethical safeguards can help boards and executives focus their approach to managing the risks and capitalizing on the returns associated with disruptive technologies, such as AI.

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Maintaining a focus on ESG

With these competing demands, the focus on purpose and wider social and environmental considerations is at risk of slipping down a board's agenda. At the same time, competition for talent is fierce and today’s workforce has evolving standards in the areas of workplace expectations, health and well-being, innovation and tech experience, purpose and equity and inclusion.

These considerations are integral to the success and long-term resilience of the business. This means chairs and their boards should be deliberate about how they consider talent strategy as an integral part of the overall organizational strategy and purpose, keeping in mind workforce capabilities and capacity (today and in the future), the vision for diversity, equity and inclusion (including in the boardroom), leadership succession and culture.

Environmental sustainability too should be considered a business priority; not only in terms of a responsible business taking care of our planet, but also recognizing sustainability as a key factor underpinning business resilience. This, in turn, helps management consider the impact of climate change on their business models, assets, people, supply chains and the like.

Many organizations also have questions about how to make public climate commitments that are credible and realistic, how to engage with stakeholders and how best to educate and inform themselves and their organizations with an evolving reporting environment as the backdrop.

Boards have the responsibility to weigh in on these complex, strategic reporting commitments, recognizing the need for the right capabilities around the boardroom to help address them and provide sound advice and counsel to the wider management team.

Governing through uncertainty - what are the next steps for boards?

Chairs and their boards play a critical role in helping ensure the success of their organizations while understanding and safeguarding against challenges and risks. And, while there are no straightforward paths, there are logical steps and considerations to help address the complexity of governing through constant change and disruption. These include:

• Building a board with the right skills, capabilities and diversity relative to the external environment, as well as the organisation’s strategies, challenges and opportunities to enhance the quality of decision-making.

• Building clarity over the board's areas of focus explicitly working through strategic, risk-focused and anticipatory elements.

• Building a prioritized agenda that considers strategic and foundational matters, as well as time-critical or disruptive complexities.

• Building a focus on the longer-term resilience of the business, invoking activities, such as scenario planning to understand the longer-term impact of today’s challenges and evaluating potential reactive actions.

• Building board structures, committees or other bodies as necessary that help ensure the right expertise and dedicated time can be applied to specific topics.

• Building a psychologically safe board environment space for the executive and the board members to share their views, thereby supporting and challenging the wider team in equal measure.

All of this must be executed while acknowledging that management needs time and space to deliver its business strategies and to grow and run the business. Challenging management is important, but equally so is partnering with management, thinking about when and how far to lean in, how best to offer counsel and guidance and when and how to challenge.

Change continues to be a constant: as chairs and boards, our approach to governance cannot stay static.

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