Corporate directors align with C-suite on growing risk from cyber threats
Director focus on cyber risk continues to grow. Our latest PwC Pulse Survey shows 51% of directors see cyber threats as a serious risk to their companies, higher than their peers in the C-suite (40%) — and the No. 1 serious risk for directors. Directors have seen challenging economic conditions before, but today’s increasingly risk-laden business environment makes board oversight of cyber risk even more important.
Boards expect more transparency in reporting from management. Preserving trust and communication with all stakeholders during turbulent years isn’t easy. Management can tap board experience as they navigate.
Boards want more focus and technology to mitigate cyber risk
In March 2022, the SEC proposed to enhance and standardize cybersecurity disclosures, requiring that the registrant’s board of directors oversee cybersecurity risk. The proposal would also require annual reporting or certain proxy disclosures about a board’s cybersecurity expertise, so it’s little surprise that cybersecurity is top of mind for boards of directors.
Sophisticated attackers target any weakness they can find. A cyber breach can have a vast ripple effect across a company, and board members recognize the consequences. As a result of the current business environment, 88% of board members say their company is considering revising or enhancing its cyber risk management. Directors want to know that management is focusing on and addressing the most critical cyber risks, and 58% report they’d benefit from enhanced reporting from management.
On a positive note, 57% of directors say their company plans to increase investment in cybersecurity and privacy in the next 12 months. And 58% say their company is already taking action around cybersecurity, privacy and data protection policy.
What you can do: Lean in on cybersecurity. Hear from your CISO about the key cyber risks potentially facing your company. Learning more about your company’s cyber strategy is critical, especially as disclosure requirements around cyber governance and board expertise develop. Consider how you allocate cyber risk oversight and whether you should add a director to your board with specific cybersecurity expertise.
Board members cautious on economy
Three-quarters (76%) of board members say it’s likely inflation will remain elevated over the next 12 months, and 74% say the US will likely suffer a recession in the same timeframe. According to 74%, the political tension and divisiness that’s plagued the country is likely to accelerate over the next year.
During the robust years of an extended bull market, investment portfolios continued to rise. Now, with a potential recession looming, many directors tell us they believe institutional investors will increase their focus on certain areas. Sixty-seven percent of board members responding to our survey tell us these investors will increase their focus on capital allocation. According to 58%, institutional investors will concentrate on long-term strategic initiatives, and about half (52%) say that shareholders will look at short-term stock performance.
Sixty-one percent of the directors say difficult economic conditions, including the possibility of recession, will bring greater scrutiny on executive compensation from institutional investors. On the other hand, board diversity and carbon emissions seem to be less pressing issues for now.
What you can do: As a director, use your breadth of knowledge and experience to help management teams. Ask for increased transparency in reporting. This can help you better understand what’s working and where changes may need to be made. And transparency can highlight what the company is doing to build and maintain trust.
Boards give management good marks
As executives navigated the many challenges and upheavals over the past few years, they’ve learned the importance of being agile, and many say their companies are doing a good job of responding and shifting when necessary. Despite many looming business risks, most directors (83%) tell us executives are focusing their business strategy on growth.
From the board’s perspective, management is doing well in related areas as well. Fifty-one percent of directors say management is highly effective at managing talent, and 50% say the same about identifying growth opportunities. Nearly half (47%) say management is very effective at being able to pivot strategy, but they have some work to do around anticipating what customers want.
Only 38% of directors say management is effective at finding operational inefficiencies, and 14% say management is not very — or not at all — effective at doing so.
What you can do: Bring fresh perspectives and ask questions about management decisions on strategy and risk management. As economic challenges arise, maintain an agile mindset. Dig in where you think management isn’t doing a good job — and see where your experience and knowledge might be an asset to help drive more strategic discussions.
In difficult times, trusted companies and products hold true
According to our findings, most companies are upping their trust game with 67% of directors telling us their companies are developing or refining their trust strategies. And because multi-dimensional trust extends beyond shareholders, more than half (58%) of the directors in our survey say customer experience figures into management plans over the next 12 months.
But how agile is your company when changing strategy to deliver open and ongoing communication to customers and others? According to directors, 47% say their companies are very agile when it comes to stakeholder demand for transparency, and more than half (57%) say their company will be proactively more transparent with all stakeholders in the next 12 months.
What you can do: Board oversight that helps increase stakeholder communication can help bolster trust. As a director, you should expect reporting and transparency from management on corporate values and purpose. As businesses navigate troubled times ahead, governance that stresses agility in planning strategic initiatives and ongoing communication with stakeholders are critical to success.
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