Challenging uncertainty

Scott Bridgen at Diligent suggests some proactive steps for boards to tackle economic and regulatory uncertainty

 

Corporate boards are currently facing unprecedented challenges due to economic and regulatory uncertainty. In the UK, inflation remains stubbornly above the Bank of England’s 2% target, and government bond yields are reaching highs not seen since 1998.

 

Meanwhile, across the pond, boardrooms are struggling to keep up with the new administration’s fluctuating tariff policies, including recently announced 25% tariffs on Mexico and Canada, while a similar package threatens the EU. 

 

New regulations in EU jurisdictions, such as NIS2 and DORA, are shaking up boards with the latest stringent compliance regulations. Although this currently only impacts businesses operating within the EU, the UK is planning to update its own cyber resilience plans with the introduction of the Cyber Security and Resilience Bill. 

 

With all this in mind, it’s no surprise that executive burnout is on the rise in boardrooms. Impactful judgement can be challenging while boardrooms are trying to navigate an increasingly strenuous economic and regulatory landscape – but without sound decision-making, boards get stuck in a vicious cycle of shock announcements, ineffective responses, and damage control measures, only to be hit by the next wave of challenges. 

 

Fortunately, boards can break this cycle. This is where strong governance practice and technology come into play to help boards manage the onslaught of information and make meaningful, strategic decisions.

 

Strong oversight drives purposeful decisions

A good starting point is ensuring effective corporate oversight. Every corporate board knows that one of their key responsibilities is to guide, supervise and ensure accountability for their organisation’s management operations and strategic direction.

 

Yet, there are executives who overlook the significance of oversight, treating it as an obstacle rather than the foundation for informed and impactful decision-making. According to a 2024 survey conducted by PwC, around 40% of executives can’t differentiate between the role of corporate oversight and management. 

 

So, how can corporate boards feel empowered to guide? Crucially, they need access to comprehensive data to stay ahead of market fluctuations and make informed decisions. Leveraging digital reporting tools that draw on data from authoritative sources of market intelligence provides a significant benefit at times of uncertainty. As such, boards can always remain well-prepared for new developments. 

 

It’s true that technology can help reduce the burdens of boardroom decision-making, but human oversight of data is of equal importance. Refusal to embrace new technologies is detrimental in an environment where competitors undoubtedly use them but relying solely on technology can leave a board prone to critical mistakes. So, striking the balance between innovation and the human touch is vital for successful governance.

 

Establishing a robust risk culture

Ensuring effective oversight is a good start, but this alone will not alleviate burnout. Economic and regulatory challenges are ever evolving, and the level of risk facing companies is reaching unprecedented highs. Research from the Beazley Group found that 42% of global executives in 2024 now believe they are operating in a high-risk environment, up 11% from the previous year.

 

Yet, despite this increasing perception, risk management can be overlooked in boardrooms. This is why executives must take a proactive approach and develop a ‘risk culture’ within their organisations. 

 

In practice, this simply means that executives, managers, and directors must actively engage with risk and set a top-down approach that encourages similar behaviours throughout the organisation. Boards should focus planning and overseeing actions that have been delegated to the correct departments. 

 

However, taking on too much will cause burnout. This is where effective delegation will be key. This also goes for risk management, where breaking down operations into processes, software, solutions, data, and third-party interactions enables boards to pinpoint risks and inefficiencies while enforcing accountability measures.  

 

 

Turning goals into actions

Once a boardroom has ensured effective oversight of operations and is actively engaging a risk management strategy, the foundations are in place to begin positioning a business for long-term success. However, if there is no metric by which success can be measured and progress can be observed, burnout is inevitable. 

 

For long-term successes, a board must set achievable goals to consistently measure the company’s performance. Key performance indicators (KPIs) must be set to evaluate both successes and areas for improvement, which will provide a framework for boards to assess the effectiveness of new programmes and initiatives. 

 

 

Maintaining compliance boosts confidence

Finally, the ultimate hurdle is compliance. The last thing a board needs is to put effort into exercising good oversight and risk management, only to realise that they are not complying with current legislation.

 

According to a report published by the EU cybersecurity agency ENISA, six of the critical infrastructure areas outlined in the newly enacted NIS2 legislation are failing to comply with its requirements. As the compliance landscape grows increasingly stringent, it is crucial that boards keep up to date with legislative changes.

 

Technology can help alleviate the burden by providing tools and tailored insights into individual businesses and the specific actions they can take to ensure compliance with new legislation.

 

While every boardroom is different, these practical steps will help promote impactful decision-making among executives, more streamlined governance processes and avoid burnout amid heightened economic and geopolitical challenges. 

 

Global markets are unpredictable, but by implementing technology that delivers up-to-date, tailored insights and targeted guidance, boards can navigate periods of heightened regulatory volatility and economic instability with more confidence.

 

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Scott Bridgen is General Manager, Risk & Audit at Diligent 

 

Main image courtesy of iStockPhoto.com and Vladislav Chorniy