When we explored the greatest challenges in strategic corporate governance a year ago, we highlighted the growing pace of the international economy and global value chains. Fast forward to now, and we’re facing the challenges of an abrupt slowdown and crisis management.
COVID-19 hit us all with full force – head-on and unexpectedly. This is surprising really, especially as various organizations and authorities had already clearly flagged a global pandemic on their list of potential risks. However, the past year has reinforced the importance of one core leadership competence in the board of directors: agility. The ability to react flexibly and professionally to external influences has proven a critical success factor. Again this year, the coronavirus will not release us quickly from its grip. The board of directors will have to adapt its strategic management of the company depending on how the virus develops; this is true across industries and regardless of a company’s size or location.
Significant upheaval and uncertainty will define the work of all business leaders as they face questions in the months ahead. How can we maintain or adjust business operations? How do we manage a decentralized workforce? How can we accelerate digital transformation? What will make supply chains more robust and strengthen customer loyalty? At the same time, though, some companies are identifying new growth opportunities even in this uncertain environment.
Beside the pervasive COVID-19 pandemic, there are other factors that will influence the work of the board of directors, from an emerging recession, deep-seated social unrest and growing national debt to elevated cyber risks, regulatory scrutiny, and – lest we forget – ongoing climate change and the knock-on effects. Management, boards of directors, employees and supervisory bodies should all prepare for massive political and market pressures.
In this context, strong leadership and communication are essential to bolster employee, customer and investor trust. Compassion and transparent communication have become more important than ever. As many have emphasized, a company’s stakeholders will always remember how they were treated during the COVID-19 crisis.
Managing key risks, innovating and capitalizing on new opportunities continues to be of central importance in safeguarding a company’s growth. The concept of investor value is currently undergoing transformation – a process that has been boosted by COVID-19. Companies are asking: What is our responsibility to society and our stakeholders? Environmental, social and governance (ESG) criteria influence not only decisions at board level, but also investment decisions of large institutional investors and asset managers. Reaching out to shareholders and investors is a growing corporate priority as institutional investors hold boards of directors increasingly accountable for the overall performance of the company and also demand more comprehensive disclosures.
The trend of advancing digital technologies such as cloud computing, AI and blockchain is not new, but it has accelerated in light of the pandemic. This is true of both capability and application. Therefore, new technologies play an increasingly essential and challenging role for strategic orientation and risk assessment – both in terms of potential market shifts and protective measures. For example, it is all the more important now to be vigilant in identifying and closing the gateways to cybercrime.
What already applied before the disruption triggered by our global health crisis (and its effects on economy, society and business) will be all the more important in future: Agility, resilience and corporate governance based on trust and dialog with stakeholders.
KPMG closely follows the trends and challenges in Switzerland. In our Board Leadership Center, you will find regular thought leadership on current board topics. A recent example is our "On the 2021 board agenda", which is published annually by KPMG Global and explores the topics mentioned here in more depth.
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