New year, new Board? 7 resolutions for the coming year
What Boards are prioritising across the Board for 2023
The past few years have brought unprecedented challenges to both the governance industry and boardrooms across the globe. A global pandemic, the subsequent shift to remote work, online cancel culture and its impact on leadership, increased employee activism and the hurdles employees face, supply chain disruptions and global shortages, inflation outstripping its four-decade high … the list goes on and on. Many of these issues naturally became the focus of boardroom discussions in 2022.
At the end of 2022, trends started to predict the critical points of discussion for 2023. Boards across the industry have been navigating and preparing for these challenges for months, but they will continue to be at the forefront of organisational thought in the coming year.
COVID-19 prompted a shift in thought processes for many Boards, shifting them towards an increased awareness of how they govern and manage negative and positive risks in their business. An emergent trend stemming from this awareness showed that more and more Boards implemented Risk Committees, recognising the value of being prepared.
There is an increased understanding within boardrooms that risk is not limited to the financial sphere and that this should be reflected in the committee structure of the organisation; rather than having just an Audit Committee or a Finance Committee playing double duty on risk management, companies have elected to designate a separate committee, signalling increased prioritisation of this area.
What areas are Boards, CEOs and Risk Committees focusing on ahead of (and on into) 2023? Below we explore seven key areas to watch for the coming year.
Read on to get a peak at 2023’s top trends to come:
1. The Global Recession:
A primary area of focus for many companies in the new year will be preparation and prevention work against the risks of a global recession. Many organisations are hoping to stay ahead by preparing now for a potential economic downturn. This entails large-scale layoffs for companies already experiencing profit deficits or for those whose revenues are expected to decrease in 2023. Recession risks have been on the rise throughout 2022 due to changes in policies and rapidly rising interest rates in a bid to curb inflation. Added to that, the printing of money has slowed globally. Boards have consequently been taking a close look at their staff and considering pairing down the numbers of employees in their organisations – we expect this trend to increase throughout 2023.
2. Workforce Retention:
Globally, organisations are increasingly struggling to attract and retain skilled employees. The skilled worker shortage is visible across industries, creating competition between companies and giving power to employees. Many organisations are turning to remote international labour to fill the needed posts, a trend that has been helped by the shift to remote work these past few years. Boards are focusing on this trend due to its correlation with company goals. HC materiality disclosure requirements also serve to highlight this growing challenge in the coming year.
3. The Supply Chain:
The past few years have seen us grow accustomed to frequent – and not insignificant – supply chain disruptions. Although companies have done their best to solve these issues in 2022, global disruption and shortages continue to be a challenge for many people and companies. Boards should be aware that this issue is far from solved and prepare accordingly, as long-term disruption may have far-reaching effects on their company goals. Supply chain scorecards are an increasingly-present feature of Board Books, demonstrating the commitment of Boards to this area.
Many Boards are very concerned about inflation in 2023 – and rightly so. Many are engaging in scenario planning to scope out potential outcomes and lingering effects. Some Boards predict positive scenarios for companies and investors, citing strong global economies, however, rising interest rates keep Board members gripped over potential financial outcomes in 2023. This area mirrors the increased focus on recession planning, the two issues being interlinked.
With the recent boom in AI technology and the increased challenge of finding and retaining workers, automation options are increasingly being explored by Boards across all industries. This could potentially increase company output and fill the gap in the availability of skilled workers currently being experienced. However, leaders aware of this area will know that automation simply shifts the search criteria for qualified candidates rather than resolving the issue at its source. We predict that Boards will increase consultation with their CEOs on automation-related opportunities and study in 2023 as pertains to all levels of their organisation.
Boards are seeing increased activism from their employees these days, in part due to the aforementioned issues of workforce attraction and retention, meaning that skilled workers – being in high demand – have greater power in the workplace. Employees across industries are organising to demand fair wages and safe working conditions, and activism is growing both internally and externally for companies. Boards should be aware of the “protestable” risks associated with their organisation and plan accordingly to mitigate said issues.
Increasingly these days, Boards are listening to the concerns of their stakeholders and considering sustainability in their decision-making processes. With increasing transparency throughout organisations being demanded by consumers, companies are being held to higher standards of overarching purpose and long-term value. Customers are coming to expect accessible sustainability information in the form of ESG reports. In an effort to comply with this demand and protect revenue as well as options, Boards are focusing more on this area – a trend we expect to continue in 2023.
Although the Board predictions for 2023 are overall tumultuous ones, with the right preparation and flexibility, organisations can hope for a great year ahead. Good luck!
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