The digital boardroom is still a work in progress. While a chief technology, digital or information security officer can present an overview of the current cyber risks and opportunities facing a company, the issue for many boards is ensuring they also have the depth and breadth of understanding created by digital advances in their industry. This is critical if the board is to have a full dialogue with management on how the digital economy is reshaping the business and its future. It is also central to their duty of stewardship of the assets of the business on behalf of shareholders.
The upside of the digital transformation of business has been evident over the past decade, transforming existing business models and enabling new ways of finance and commerce to emerge. But it is fair to say that many board members probably view the digital risk/reward balance as skewed in favour of risk, given the wave of high-profile cyberattacks on both industry and government which underline the vulnerabilities of existing tech infrastructure. These not only increased the emphasis on tech security, but also showed the costs of failure were not just financial. They include threats to intellectual property, market reputation and business profile.
The board has to ensure the company has strong structures in place to identify, assess, monitor and manage tech security; that the business has the resilience to respond to cyber breaches; and that the board and management have the overview and information to weigh the costs of risk mitigation against potential threats. All of this requires boards to have a solid understanding of the evolving cyber risk landscape.
Other digital challenges include growing demands for – and new interpretations of – privacy and data management for companies that operate internationally, presenting boards with a separate set of regulatory exposures which may carry exceptional penalties. Such inconsistent regulation appears to be on the upswing and boards must be alert to the operational implications. While regulatory gaps remain in areas such as fintech, national and regional regulators are making an effort to patch these.
But the digital future offers opportunities as well as threats. Setting aside the hype, it is clear that we are on a very rapidly moving journey towards a technology-mediated – if not tech-directed – landscape in nearly every sector of the economy. The scale of what is possible is expanding daily and it is incumbent on business leaders to keep pace with the realm of the possible. Helping boards develop this level of understanding can happen in several ways – including the recruitment of specialist directors, or even the creation of digital advisory boards with a different mix of skills from the main board.
The digital revolution has opened up the market landscape, changing the way that businesses define themselves, operate, interact and think about their future. The pace of this change can be a challenge for the existing workforce in legacy industries as well as the wider economy, carrying enormous implications for society. It is likely that the moveable feast that is the digital board will be, like the digital economy itself, evolving for some time to come.
As the cycle of innovation continues to turn and market pressures escalate, business leaders from every industry are facing unique challenges.
Find out how one of the world’s most innovative law firms helps businesses navigate new paths to growth at: www.paulhastings.com/tomorrow