How to create clarity in ambiguity in board priorities

Focus on capital

Global economic activity is expected to remain subdued in the year ahead. But Asia remains promising in driving global growth. Asia is expected to contribute to 60% of global GDP growth in 2024 — higher than the pre-COVID-19 pandemic average.1 Southeast Asia is projected to see an uptick in growth the same year, spurred by favorable factors, such as the continued travel revival, steady internal demand and greater public investment.²

Notwithstanding, boards are generally cautious and focusing strongly on capital allocation. While global appetite for M&As has fallen to its lowest level since 2014, companies should not hold back from crucial investments that underpin long-term growth, such as those related to technology and sustainability. The board must urge the management to take a long-term perspective to avoid missing out on innovations or investments for growth and competitiveness. Being proactive and transparent in communicating the company’s growth narrative and capital strategy to stakeholders is equally crucial. 

Elevate the talent agenda

Having a workplace culture that enhances retention and belonging has become more challenging — and therefore a differentiator — for organizations. The EY 2023 Work Reimagined Survey found that nearly four in 10 employees in Southeast Asia are likely to leave their jobs for competitive salaries, career advancement and better wellbeing programs. If boards have been sidelining talent matters, now is the time to engage with the chief human resources officer and get close to employee sentiments.
 

Artificial intelligence (AI) — including GenAI — is expected to impact employees in more ways than displacing or augmenting job tasks. The above survey found that while more than 90% of employers in Southeast Asia are already using or planning to use GenAI within this year, only a quarter plan to provide GenAI-related training. This is a very telling gap. Re-skilling and upskilling must take priority if the workforce is expected to fully harness technologies — and grow and thrive with them.

Innovate fast with technology

There is still much uncertainty in the AI space, making it hard for executives to respond with agility. Governments are seeking to strike a balance between fostering innovation with AI and designing regulations to mitigate macro risks.
 

Despite the ambiguities, companies know that inertia can cost them opportunities to innovate for growth. Leading companies are moving beyond thinking incrementally about AI in terms of how they can make existing processes more efficient to considering how AI could transform business models, products and services. At the same time, considerable attention must be given to robust AI policies and governance to not only maintain compliance but also build confidence with regulators, investors and other stakeholders.

Keep up on climate action

With just six years to meet the Paris Agreement target of halving greenhouse gas emissions worldwide by 2030, swift action from companies must continue to address the escalating climate crisis. Stakeholders are closely monitoring how companies are meeting their emissions reduction targets and climate transition plans — and so too must boards.
 

While the push to prioritize sustainability is challenging as ESG considerations are wide-ranging and require trade-offs that may be hard to quantify, investing in climate action pays off. EY research found that companies taking the most action to address climate change are 1.8 times more likely to report higher-than-expected financial value from their climate initiatives, compared with those taking the least action.

Moreover, multiple studies have shown that investors look for focus. Companies that direct their efforts in a concerted manner on the most material ESG aspects for their industry have historically demonstrated a higher alpha than peers that do not. 

The boardroom concerns discussed above sit against a backdrop that is increasingly fraught with geopolitical tensions, which arguably have had the most complex impact  on corporate strategy in a generation. Robust board leadership is crucial to help increase the resilience of the enterprise’s business model and supply chains to prepare for future shocks. After all, the board’s role doesn’t stop at defending the past; it’s also to define the future — hopefully, one that’s marked by resilience, growth and optimism.