British boards are focusing on immediate survival over future-proofing amid economic challenges.
- Climate change, AI, and cybersecurity are taking a backseat in boardroom discussions, with only 8% prioritizing cybersecurity.
- Economic volatility is the most significant concern, with 19% of boards citing it as the major risk.
- Boards are struggling to attract the right non-executive directors due to inadequate remuneration and high personal risks.
- The role of the non-executive director has evolved, demanding more strategic involvement and stakeholder engagement.
In the face of ongoing economic turbulence and challenging trading conditions, British boardrooms are prioritizing immediate business risks over long-term strategic issues. Critical threats such as climate change, artificial intelligence (AI), and cybersecurity are being sidelined, as highlighted by a report from Norman Broadbent and BDO. The report, based on research among 200 board directors, indicates a visible lack of focus on future-proofing risks.
A closer look at the statistics reveals a startling trend: only 8% of board members consider cybersecurity as one of the top three risks, while only 4% and 2% think AI and environmental concerns are paramount, respectively. In stark contrast, nearly a fifth of boards (19%) see the economic environment as the primary threat, with workforce talent, access to finance, regulatory changes, and geopolitical factors following closely behind.
This shift in priorities could be attributed to a lack of expertise among non-executive directors (NEDs), which is ironic given that topics like cybersecurity and ESG are among the most popular on board education agendas for the upcoming year. Governance, legal, and compliance training top the list of desired learning areas, reflecting the increasing regulatory burdens placed on NEDs.
A new report—”Navigating a New Era for the Non-Executive Director”—was launched, underscoring the evolving responsibilities of NEDs. Once viewed as predominantly advisory, their role has grown more intricate, demanding strategic decision-making and extensive regulatory compliance. Only 3% of directors now value networks as a significant contribution of NEDs, whereas an independent perspective and strategic thought are highly sought, cited by 26% and 22% of respondents, respectively.
Notably, the research found that a significant portion of NEDs feel their remuneration does not align with the demands of their role, with 53% expressing this concern. The dissatisfaction is particularly prevalent among NEDs of small and listed companies, where the risk/reward ratio appears skewed. Furthermore, boards are facing recruitment challenges, with nearly all respondents acknowledging difficulties in attracting NEDs with the requisite skills and experience.
The complexity of the NED’s role is reflected in their growing interaction with stakeholders including shareholders, regulators, and external consultants. Shrenik Parekh of BDO emphasized the shift in the NED’s responsibilities, noting that their role now includes significant interaction beyond board meetings, such as stakeholder engagement and setting a definitive ‘tone-from-the-top.’
The evolving landscape in boardrooms necessitates a recalibration of non-executive director roles and remuneration to align with their critical contributions.
