Boards across Europe, the Middle East, India and Africa (EMEIA) are navigating a volatile and complex business landscape. Geopolitical tensions have heightened considerably over the past 12 months due primarily to the war in Ukraine. Furthermore, the global economic outlook is highly uncertain, with inflation a major concern. Many markets are wrestling with a cost-of-living crisis that is driven by high energy prices, rising labor costs and increased demand for goods and services as economies reopen after the pandemic. As a result, supply chains are stretched, skill shortages continue and cyber attacks are on the rise.
In addition, sustainability is an ever more prominent issue. Companies’ stakeholders — including their customers, employees, investors, policymakers and regulators – expect them to play their part in tackling today’s major environmental and social challenges. Boards should view sustainability not only as an issue but also as an opportunity to protect and create shareholder value. They may well need to rethink how they allocate capital to both new and existing business. This will likely also involve identifying how good governance will support their company to accelerate its transition to a net-zero business model; as well as addressing issues like biodiversity loss or social inequality where they materially arise from the company’s operations.
In this evolving business context, boards are rethinking their role, as well as their composition and structure. To effectively serve as strategic advisor while providing appropriate levels of oversight, it is more important than ever that boards are composed of a diverse range of people with a wide range of experiences, skills and backgrounds. Given the specific challenges they face, they will want to seek out members with expertise in areas such as cybersecurity, politics and talent; or find other more creative ways to obtain specialist input to their decision-making. Committees are a good way for boards to give greater attention to specific focus areas such as environmental, social and governance (ESG) matters.
To provide robust governance, boards need access to education and information. Training is key, as is high quality reporting from the company’s internal functions. It may also be necessary for the board to seek external advice and expertise, especially on focus areas that are new or emerging, or where the company is exposed to heightened levels of risk.