Corporate Directors Divided on Their Boards’ Ability to Oversee the Risks and Opportunities of Disruptive Innovations

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A recent survey, How Boards Are Governing Disruptive Technology, by Corporate Board Member and Ernst & Young LLP, shows that half of corporate directors report being unconvinced their boards have the appropriate resources to move their companies forward in this era of fast-paced technological change. Most say they rely on management briefings as their primary source for staying current on business trends and emerging technologies.

This new study by Corporate Board Member, a division of Chief Executive Group and a market leader in board education, along with Ernst & Young LLP, a leader in assurance, tax, transaction and advisory services, shows that 48% of corporate directors report being unconvinced that their boards have the appropriate resources to move their companies forward in this era of technological disruption. The report provides a snapshot of what is taking shape in boardrooms across the country, and how directors can improve their oversight of disruptive innovation, as well as assess the risk-reward equation of emerging technologies over both the short- and long-terms.

The survey reveals that boards are more confident in their management team’s acumen in these matters, with 46% of directors saying they feel “very attuned” to the potential disruption on their organization and industry, compared to 69% who responded the same about management.

“Directors should look outside of their company to stay abreast of the latest developments because independent external data can help the board gain valuable insight into strategic pivots occurring within their company’s industry and adjacent sectors,” says Steve Klemash, EY Americas Leader of the Center for Board Matters.

“It’s one of corporate directors’ duties to acquire sufficient knowledge of an issue to be able to challenge management’s assumptions and strategy,” says Melanie Nolen, research editor at Corporate Board Member. “They had to do it with cybersecurity years ago. They have to do it again with technological innovations. There’s no way around it.”

While 38% of surveyed directors believe the most important action boards can take to help their companies navigate the current environment is to incorporate the matter into the full board agenda, only 29% of boards discuss emerging technologies regularly. The remaining 71% say they either discuss it once a year (23%) or on an ad-hoc basis (48%).

“Directors should embrace a learning mindset, and boards should pursue educational opportunities, spend additional time with management and seek counsel from external experts or advisory panels as appropriate,” says Klemash. “This isn’t about making every director a technology expert. It is about increasing the board’s competency so that they can ask thought-provoking and constructive questions of management.”

Other key findings presented in the report include:

83% of directors say they would support potentially disruptive innovation projects that offer long-term value even if they create additional risks and may not deliver short-term returns.

58% selected implementation, talent and unintended risks as the biggest challenges to adopting emerging technologies.

Of the innovation-related metrics boards monitor, the most common, at 54% of respondents, is revenue from products or services.

Half (49%) believe their board invests sufficient time in discussing emerging technologies to properly assess risk.

67% of directors report that the oversight of emerging technologies resides within the full board.

To download the research report, How Boards Are Governing Disruptive Technology, please visit https://go.boardmember.com/disruptive-tech-research-2019/.

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