What are key opportunities presented by the metaverse?
The metaverse is likely to be applicable to a variety of use cases — from entertainment to education, commerce, and even virtual prototyping. When it comes to entertainment, we can expect more immersive extensions of what is already occurring in virtual worlds on gaming platforms such as Fortnite and Roblox. The demand for such experiences is already palpable — a Lil Nas X concert held on Roblox, for example, was “visited nearly 37 million times.”⁴
From the perspective of training and education, one could imagine the value of the metaverse to a medical student to better simulate the conditions of an emergency room or surgery during their classes. Or perhaps an elementary school could virtually visit United Nations World Heritage Sites and interact with digitally generated versions of historical figures without ever leaving the classroom. Engaging in immersive virtual public spaces will also enable cross-cultural experiences that will be more accessible to a greater number of people. In addition to external customer/user engagement, boards can help their companies understand the power of using these platforms for their own internal learning needs, especially for Gen Z and younger front-line workers.
Finally, in the working world, there is a fascinating intersection between digital twins and the metaverse. Digital twins are, in effect, a digital replica of a physical object such as a city, an office or even Earth itself. They can be used to virtually test new policies or business decisions before making changes in the physical world. When combined with the immersion of the metaverse, one can imagine “being” in the digital twin to help with tasks such as product development, urban design and even customer experience design. Imagine how much more immersive virtual onboarding could be if new employees could take a tour of their office before joining. This will be particularly valuable for new joiners with accessibility needs and in our hyper flexible working environments.
Of course, these are just a snapshot of the possibilities. As the metaverse comes further into the mainstream, additional use cases are likely to emerge. However, as we shall see, these opportunities are not without their risks.
What are the potential risks associated with the metaverse?
The internet as we know it today is the lifeblood of commerce and community. With it comes creative ways to engage with our peers and conduct business that metaverse technologies will expand and evolve in novel ways. At the same time, the web has introduced many concerns, ranging from online harms to data privacy, that are likely to be magnified by the widespread adoption and commercialization of the metaverse.
Boards are essential to ensuring that an organization’s strategy and direction are not at odds with its purpose, values, and obligations to shareholders and broader stakeholder communities, including society and the environment. To fulfil this responsibility, it is key for boards to understand the risks exacerbated by the metaverse and to add the corresponding technical and social risk topics to the enterprise risk management process.
First, there are concerns surrounding privacy. Due to the suite of fine-grain biometric and emotional data likely to be collected through metaverse hardware, there are concerns regarding how this type of information will be used — particularly in combination with advanced analytics tools powered by AI.5 Given the distinct focus on algorithmic manipulation and nudging in impending AI regulations, such as the EU AI Act, and broader ethical concerns regarding the use of technologies to alter human behavior, this is an area that companies and their boards should pay special attention to. Boards must focus on the privacy of customer and employee data, depending on the applications at hand in the metaverse.
When it comes to security, boards also need to recognize risks across three core areas: devices, fraud and identity. One can imagine targeted attacks on metaverse hardware, such as VR headsets, that could be used to steal private information from unknowing users. The metaverse is also likely to enable more advanced or novel phishing and counterfeiting attacks, such as plagiarized non-fungible tokens (NFTs) and scams to obtain wallet credentials. Finally, there are concerns surrounding digital identity in the metaverse, whereby user accounts may be compromised and precipitate digital identity theft, after which users may incur reputational damage or financial losses.
Online harms should also be top of mind for boards when governing the metaverse. Social media companies today struggle with content moderation at scale to limit content that may be derogatory, hateful, misinformative, immoral or unlawful. Now imagine the challenge of moderating the real‑time conversations and haptic interactions of thousands or millions of people occurring simultaneously in a virtual space. For users who will participate in virtual storefronts or attend metaverse conferences and concerts, organizations operating and building metaverse communities will need to think through how they can ensure safety in these experiences. This will be particularly true in cases involving users who are more likely to experience online harms, including children, women, racial minorities, and members of the LGBTQ+ community — all priority oversight areas for boards as called out by various stakeholders and especially investors.
Considerations for future-proofed boards
With a balanced view of risks and opportunities of the metaverse in hand, there are three things that boards can do today to enhance oversight and add value.
1. See through the hype cycle.
Despite growing interest in the metaverse, experts remain quite mixed on the extent to which a robust system of metaverse communities will be realized and, further, whether such a future would be beneficial to society. To take a critical and measured approach toward the metaverse and its applicability to the organization, boards should ask: Are we engaging with the metaverse due to its buzzword status, or does it pose a specific benefit to our business that enables long-term value without compromising our core principles?
2. Prioritize oversight according to purpose and potential risk.
Boards have essential responsibilities to support corporate investments in new technologies that boost the company’s strategy, purpose and values. Board oversight is necessary if the metaverse is critical to achieving the organization’s strategic long-term objectives. For example, in the gaming sector, investments in the metaverse may be central to an organization’s products, services, and business model, which makes attentive oversight valuable. However, when the metaverse’s value is ancillary to the business or purely for marketing purposes, oversight priorities and focus areas may be different and not worth the effort. Similarly, more substantial oversight is required when metaverse investments may threaten a company’s reputation or legal standing. Where risks are limited to financial or operational vulnerabilities, board oversight may be more limited.
3. Understand regulations and ethical norms.
Boards also help oversee compliance with laws and regulations. As activities in the metaverse can rely on the use of digital currencies and other assets such as NFTs, transactions could also trigger involvement from financial regulators, including the SEC or Commodity Futures Trading Commission (CFTC) in the US and the Financial Conduct Authority (FCA) in the UK. Likewise, privacy regulators, including the Federal Trade Commission (FTC) in the US and the Information Commissioners Office (ICO) in the UK, may also share jurisdiction over metaverse activities. Boards play a key role in ensuring that companies understand and address all legal and compliance issues in support of management delivering on its metaverse strategy. Beyond legal and compliance issues, companies have an opportunity to shape the ongoing policy debate. Boards can explore how companies work with policymakers to formulate practical rules and regulations that promote innovation while respecting human rights, as well as delivering value to multiple stakeholders.