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Home Business Insights

Boards of directors are increasing risk appetite into 2022

FutureCFO Editors by FutureCFO Editors
October 26, 2021
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Photo by Wokandapix on Pixabay

Boards of directors (57%) surveyed by Gartner have increased or expected to increase their risk appetite heading into 2022, said the advisory firm recently.

In addition, boards of directors (BoDs) cite economic uncertainty (38%), disruptive business models from competitors (35%) and cost inflation due to supply shortages (28%) as the top risks to business performance, according to Gartner.

The 2022 Gartner Board of Directors Survey was conducted via an online survey from May through June 2021 among 273 respondents in the US, Europe and Asia Pacific in a board of director role or a member of the corporate board of directors, said Gartner.

During the pandemic, BoDs recognised that they needed to become comfortable operating in an environment of significant risk, as standing still was not an option, said Partha Iyengar, distinguished research vice president at Gartner. 

“This drove them to embrace the ‘try fast, fail fast approach,’ and into 2022, BoDs will continue taking risks such as making technology investment decisions with incomplete information or making financial bets without up-front visibility around a guaranteed return,” Iyengar noted.

Digital technology remains a top priority
BoDs remain highly committed to digital technology initiatives, which was ranked as a top strategic business priority by 58% of survey respondents, said Gartner, adding that this is a slight decrease from the 2021 survey.

Having invested so much in digital business over the past 12 to 18 months, enterprises are taking a pause to validate their strategy and ensure ROI, said Iyengar. 

“The core focus for BoDs is now on technology integration and creating a more enduring and systemic digital economic architecture, where technology is infused throughout the business and drives business outcomes,” he pointed out.

Changing capital allocation to accommodate digital investments
The survey found that 64% of BoDs have attempted to alter their enterprise economic structure to a more digital economic architecture.

It means that they are changing their capital allocation and governance approaches to accommodate digital investments, Gartner said. 

As examples, 40% of BoDs have moved digital business-related budgets to business functions, rather than a central technology or IT budget; one-third are changing the metrics used to evaluate ROI from digital investments, Gartner added.

While boards are shifting focus to the role of technology beyond IT, CIOs remain visible as a key partner in BoDs’ digital initiatives, according to the research firm. 

One third (34%) of BoDs report having a formally constituted IT, digital or technology subcommittee, and the vast majority (94%) among them include the CIO or CTO as a member.

Workforce and social issues a rising focus
Workforce issues were among the top strategic priorities for 52% of BoDs, representing an 86% increase in interest over the 2021 survey, said Gartner.

“Workforce concerns are closely linked with technology transformation,” said Iyengar. “As enterprises accelerate their digital business initiatives, issues such as the IT skills shortage, the need to create a digitally agile workforce and culture transformation become that much more critical.”

Environmental, social and governance (ESG), health and sustainability rounded out the top three BoD priorities, up by 100% from last year, Gartner observed. 

The survey found that 30% of BoDs report that their organisation publicly engages in leading social or political issues, while nearly half of BoDs (45%) have diversity, equity and inclusion (DEI) on their board meeting agenda at every board meeting or quarterly.

Related:  How to deal with remote conflict
Tags: board of directorsdigital technologyESGGartner
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