A new report from Deloitte examines how boards of directors can inject long-term thinking into their oversight role in an age of disruption and uncertainty.
The 10th edition of the Deloitte Directors’ Alert, entitled Taking the long-term view, assesses the views of business leaders and non-executive directors from around the world.
It identifies board responsibilities and focus areas that benefit from the application of a long-term lens.
“As the ultimate stewards of the organisation’s long-term value, the board must look beyond the immediate future and guide management to do the same,” says Deloitte NZ partner Brett Tomkins.
Consumers increasingly want to understand what is behind the product they see on a shelf
“The board should also urge management to take steps now to understand and address conditions, risks, and opportunities that are likely to emerge in the years ahead.
“There are too many examples of companies that are focused on short term horizons and returns rather than directing attention to the long-term impact of their strategies, decisions, and initiatives,” he adds.
The report says an area that can benefit from the application of a long-term lens include the fourth industrial revolution.
Also referred to as Industry 4.0, the fourth industrial revolution is driven by new technologies and relentless digitalisation.
This will require boards and management teams to plan for the long term and do so in new ways, it states.
Boards make decisions today that reach far into the future and as such need to ensure they assess, reimagine and challenge their organisation’s impacts
“The novelty and speed of Industry 4.0 may appear to demand snap judgments and rapid responses. But that very urgency requires the board and management to grasp the long-term implications of this massive shift.”
Questions directors need to ask around Industry 4.0 include:
What do we know—and not know—about Industry 4.0, both in general and as it applies to our industry and organisation? What internal and external expertise can we access to learn more?
Which cognitive technologies have we deployed in the organisation? Where have we deployed them? What have been the results? Are we seeing incremental or exponential gains in efficiency and effectiveness?
What risks do cognitive technologies and Industry 4.0 pose to the organisation? What are the operational, financial, cyber, reputational, and other known risks? What are the larger risks to our value proposition, business model, and strategy? •
What developments have Industry 4.0 prompted among our competitors and peers? How are new market entrants or organisations on the periphery of our industry using them? How are our customers and suppliers using them?
How can the board best support management in preparing the organisation’s workforce for Industry 4.0? What people and skills will be needed? What changes will the organisation need to make in its hiring, training, retention, and workplace policies to win the war for talent?
‘Transparency is the new normal’
Zeroing in on New Zealand, Tomkins says an area the boards should look at are requirement for greater transparency in environmental, social and governance (ESG) reporting.
“For example, guidance from the NZX asks listed companies here to ‘report or explain’ their ESG opportunities and risks. This greater transparency in ESG reporting has the ability to influence reputation, talent acquisition and business value for public and private companies alike,” he says.
What developments have Industry 4.0 prompted among our competitors and peers?
“Business activities have both positive and negative impacts on society as a whole. They provide jobs for local communities and goods and services desired by their customers.
“However, they use scarce resources and their activities almost inevitably have social and environmental impacts. The importance of governance in this paradigm is vital. Boards make decisions today that reach far into the future and as such need to ensure they assess, reimagine and challenge their organisation’s impacts.”
“Transparency is the new normal,” notes Olivier Jan, sustainability leader at Deloitte Global.
“Civil organisations and the media regularly track and report on ongoing performance and specific events in terms of industrial accidents, environmental degradation, and impact on human populations. Social media has also become a force for ongoing transparency, and consumers increasingly want to understand what is behind the product they see on a shelf,” states Jan.
Get the latest on digital transformation: Sign up for CIO newsletters for regular updates on CIO news, career tips, views and events. Follow CIO New Zealand on Twitter:@cio_nz
Send news tips and comments to firstname.lastname@example.org @divinap
Join the CIO New Zealand group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.