Digital committees can help solve current board challenges
By Karen Loon, IDN Board Member and Non-Executive Director
With boards facing challenges including financial, sustainability and digital with increasing speed and impact, can digital board committees help? Why are they set up and how do they work? Who works on them, how do they integrate with board work, and why don’t more boards have them?
These were the key questions which IDP-C panellists and Non-Executive Directors Mary Antenen and Dimitri Chichlo, both based in Switzerland gave their personal perspectives on in an INSEAD Directors Network (“IDN”) webinar on “Digital Board Committees – Supporting the boards’ challenges and responsibilities” held on 29 September 2020, which was facilitated by IDN Board Member, Liselotte Engstam based in Sweden with Q&A support from Hagen Schweinitz, a fellow IDN Board Member based in Germany.
Following an introduction by Liselotte Engstam, the discussion covered a number of broad areas. Key areas discussed included:
1. Digital is key to business in the future.
Digital is a tool and an instrument which cannot be ignored. The pandemic has accelerated clients using digital channels, and has led to more staff working remotely. Companies are increasingly partnering with third parties such as FinTechs for scalability and products, improved client service, profitability, and operations. Digital allows organisations to enhance their business capabilities, simplify processes and improve customer experience.
Participants agreed that the recent pandemic had increased digital initiatives at their companies:
2. Digital is strategic
Boards and management need to understand the various digital options available to them. Their role is much more than creating a digital culture – they also need to be aware of the marketplace around them. Further, digital impacts an organisation front to back, is a key business driver and is more than IT which is often looked as outside of the business so difficult to integrate.
3. Digital transformation requires IT transformation and different ways of looking at things
In digitising their businesses, companies need to not only look at their IT platforms but the impact on areas such as cybersecurity, operations models, risk management, and compliance. Increased digitisation also requires strengthening of internal controls and access to data and enhanced data usage capabilities.
As Mary Antenen commented
“Digitisation and IT transformation projects are complex and impact all areas of the organisation and often require specific governance around these initiatives. The board and board committees need to adapt to this”.
For example boards need to address what the impact is of digitisation on the organisation’s strategy and business model and risk assessment; and how does the organisation look at partnerships, related models, and third-party risk, cybersecurity, and data protection.
4. There is no one right model of how the board should engage on digital.
The new reality is that boards need to deal with digital transformation and its discomfort. Digital strategy and risk need to be integrated into the board discussion, and the board engaged and focused on it at the appropriate governance levels. Further, digital and IT transformation is expensive. How the board engages on digital may depend on whether the board has the right capabilities in digital or IT to deal with its initiatives taking into account the speed of change and disruption, and the need for faster and more effective engagement in the organisation on the topic. Whether the company has diversity of experience from different industries and different domains of knowledge at the board and senior management levels will be a key consideration.
As Dimitri Chichlo said
“…the reason we should have such diversity at a board level is that each of us is framed by his or her own specialty. If you have only bankers sitting at a supervisory board, they will be thinking as bankers. If you only have operations, or lawyers, they will think in their frame … Diversity ensures that everyone is able to bring his or her own point of view when going digital”.
5. Having a digital advisory board, or subcommittee, may suit some organisations and allow some flexibility.
Webinar participants generally agreed that some form of digital subcommittee could enhance their board’s governance.
However, surprisingly few had discussed with their board the opportunity to complement the board’s work with a digital committee.
Participants learnt about some different approaches using digital subcommittees. One approach was organised as a formal subcommittee of the board and included both Operations and Digital, with members from about half of the board together with the CEO, CIO, CRO and COO from management’s side. This group met approximately 6 times per year.
The other was arranged as an advisory board, not a formal subcommittee. This involved both internal members (a supervisory board member, CEO, CRO, CIO) and a number of external advisors. This group met approximately 4 times per year, and are now considering nominating one of the advisors to join the supervisory board.
It was shared that external advisors can bring to organisations different and complementary skills, for example customer experience and digitisation, data analytics and IT, cyber, technology architecture and knowledge and experience of agile transformation which can be tapped on from others who have gone through them, and led similar exercises. They can also lift board competencies and bring fresh perspectives and understanding of future trends/market insights as well as new ideas.
As Mary Antenen concluded
“I think we recognise that this kind of transformation and discomfort is here to stay. It’s part of the new reality and we need to find ways of effectively dealing with it within our boards … whether it’s through subcommittees of boards (or) whether it’s through an advisory board. I think the important thing is that digital strategy and risk needs to be integrated into the board discussion. These discussions need to be in line with the speed of disruption and development that’s happening in the marketplace”.
Dimitri Chichlo further added
“Digital is not only about improving your efficiency or decreasing your costs, it’s about a strategy opportunity. So, there are both sides here – it’s a tool and an instrument, but it’s also a way that shapes the behaviour of your customers or of your market. The board cannot afford ignoring it; you cannot be blind. So, you must have people who are willing to go in this direction and understand those options”.
IDN’s next webinar for members on “Board Dynamic Capabilities for Disruptive Times” will be on 16 October 2020 from 1345 to 1445 CET.