Corporate Governance

Governance Trends Shaping 2021: 4 Priorities to Drive Success

The COVID-19 crisis, new workplace paradigms, extreme climate change, political and economic volatility, and urgent calls for racial justice have driven a shift to virtual operations. This shift, alongside a move to stakeholder-centric capitalism, has elevated “digital resilience” to a core focus among leadership. These principles must now be translated to company operations.

Focus must extend from risk avoidance and compliance to encompass strategic and fluid governance practices. Boards must pivot to new governance models conducive to long-term survival – and they must identify new opportunities for sustainable value creation. Here are four trends that will shape an organisation’s success in 2021 and beyond.

 

1. The Road to Recovery Will Be Digital

Many organisations expect to continue remote work in 2021 or, at least, transition to a hybrid model. Forrester predicts remote work will rise to 300% of pre-COVID-19 levels. Changes to the consumer and vendor landscape are just as vast, and all hold great opportunity. An organisation’s ability to succeed will depend on how adroitly it harnesses technology to enable growth, respond to change and protect its workforce in this “new normal.”

Boards must continue to focus on critical areas including company investments in more agile technologies and operations, and the cyber-security implications of a virtual world. Businesses will need to view processes like data management, cyber-security and collaboration through a holistic, digital lens.

Recommended Action for Boards:

Move beyond metrics of on time and on budget, to a focus on value. Consider implementing a cyber risk dashboard to ensure the right questions are being asked.

How Diligent Can Help:

Diligent Boards offers all the tools a board needs to thrive in a digital world. Securely access board materials, track company performance, and gather real-time information around competitive news and regulatory filings.

2. ESG Remains Center Stage

ESG remains a top priority and boards face growing demand from investors, activists, the media and stakeholders. Organisations must be aware of their evolving role in society.

Boards should also expect increased scrutiny on ESG reporting and will need to be able to benchmark themselves against the right metrics and the components of ESG that are most integral to their organisation.

Setting the right ESG goals – and measuring their progress – is key. This means making environmental sustainability a priority, bringing greater transparency to business processes, and addressing socioeconomic inequality by incorporating policies that mitigate income gaps and wage disparities.

Recommended Action for Governance Professionals:

Start benchmarking. Ensure you have access to the right data for your organisation and your peers. The World Economic Forum’s core metrics are a good place to start.

How Diligent Can Help:

Diligent’s ESG Solutions help organisations to comply with ESG standards and regulations, evaluate risk controls, benchmark governance practices, and educate leadership on new frameworks and developments. 

3. Diversity & Inclusion Moves Toward a Mandate

Concern over systemic racial, gender and ethnic discrimination will need to be addressed. Directors must show clear intent to keep diversity and inclusion at the top of their agenda, to request metrics on progress, and to ensure management implements actionable policies.

Additionally, boards will face increased pressure to act in favor of diversity and to report on progress. Board composition will be used in 2021 as an indicator of an organisation’s commitment to diversity. Indeed, 46% of public company board members surveyed are in favor of diversity mandates, indicating that we might have finally reached a tipping point with board diversity.

Recommended Action for Boards:

Self-report diversity data. Showcase the attention that has gone into your board composition and be honest about any gaps that need to be addressed.

How Diligent Can Help:

Diligent’s Governance Intel Software gives visibility into the real-time information a board needs to stay up-to-date on all things governance to keep a competitive edge and better aggregate the news and research that matters for your organisation. Keep abreast of recent appointments and diversity measures your peers and competitors are making and undertaking.

4. Board Effectiveness Will Be Enhanced by the Pandemic

Like employees, boards have settled into new ways of working. One silver lining from the COVID-19 pandemic, says Credit Suisse International Board Member Doris Honold, has been that “board members are beginning to realise that a healthy mix of in-person and virtual attendees will not affect the effectiveness of the board.”

Indeed, Diligent’s Director Confidence Index showed that only 32% of board members expect to go back to 100% in-person meetings, with the other two-thirds opting for either fully virtual or hybrid models.

The right digital tools are required for boards to maintain regular working practices, and the issue of cyber-security remains critical.

Recommended Action for Management:

Leverage the board as strategic advisors. Ask them what worked well during the pandemic, and find out how you can formalise those aspects in future board meeting processes.

How Diligent Can Help:

Diligent Messenger safeguards board and executive communication with a secure messaging platform that mirrors the experience of both email and SMS texting – ideal in a time when the vast majority of us are working remotely.

The Need for Modern Governance Practices in 2021

For organisations to thrive in these dynamic times, leadership and governance practices will need to continue evolving.

Organisations need to reassess, reprioritise and reinvent their strategies. Boards must continue to digitise their practices to drive resiliency and transform corporate governance into a strategic advantage. Modern governance equips organisations with the security, foresight and accountability to withstand challenges and drive change.

To learn more about the trends that will shape 2021, and to see best practices for boards, management and governance professionals looking to turn good governance into a strategic asset, download our full 2021 Outlook.

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