For a majority of boards of directors, risk is no longer something to avoid. Increasingly, boards view it as an opportunity. Driven by a need to accelerate digital business and respond to increasing social and political polarization, they are reacting to changes in consumer behavior to grow the business in an unexpectedly changed world.
In his presentation at Gartner IT Symposium/Xpo™ 2021, Partha Iyengar, VP Analyst, Gartner, shared key takeaways from the Gartner Board of Directors Survey for 2022.
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1. 57% of boards of directors have increased or expect to increase their risk appetite in 2021-2022
This is a significant shift in thinking with serious ramifications. Historically, boards have been extremely risk averse and conservative in their decision-making. For IT executives, this change requires being prepared to provide the board with data, analytics, predictive analytics and pattern recognition so they can make more informed decisions. The goal is no longer to avoid risk, but rather to separate good risk from bad.
2. Economic uncertainty is the biggest risk, but consumer behavior is the most significant change
Continued and growing long-term economic uncertainty continues to be the top risk to business performance, followed by disruptive business models from competitors and cost inflation due to supply shortages.
The most significant risk is the permanent change in behavior of customers, which worries boards in terms of what has shifted during the pandemic and whether that continues post-pandemic. If customer sentiments permanently shift, organizations must change with them or lose market share.
The goal is no longer to avoid risk, but rather to separate good risk from bad.
3. ESG- and DEI-Related issues are an emerging risk
Historically, boards have stayed away from politically or socially sensitive topics, but an increasing number see value in aligning corporate goals with societal values. Twenty-six percent of boards now discuss diversity, equity and inclusion (DEI) quarterly. Thirty-one percent ranked environmental, social, and corporate governance (ESG) and DEI among the top three emerging risks. Neither of these topics is new, but the pandemic forced boards to recognize them as critical. This is in part a result of credit rating agencies and investors placing increased emphasis on these issues when evaluating companies.
4. 88% of boards now view cybersecurity as a business risk
In 2016, Gartner began seeing a major change in attitudes around cybersecurity as leaders started to recognize the significant impact a cybersecurity incident has on an organization. In the past five years, the percentage of boards that consider cybersecurity a business risk has risen from 58% to 88%. In light of this, you need to think more strategically about presenting cybersecurity in terms of business risks and not technology. All functional heads must be aware of the significant ramifications across the organization.
5. Digital business remains the top business priority
Fifty-eight percent of boards flagged digital tech initiatives as the single biggest strategic business priority, down 12% from last year. However, other priorities that are increasing ultimately support digital business overall. For example, the workforce is -key to digital acceleration, and 86% more boards ranked it within their top five priorities. ESG is also getting far more attention — the number of boards prioritizing it has doubled as organizations pay more attention to societal sentiment.
6. Digital business budgets are moving to business functions
This is true for for 40% of boards, who saw the dollars shift out of a centralized technology IT budget. Traditionally, IT owned this budget; now it will play a role of facilitator, mentor and orchestrator to help functions deliver on outcomes and leverage technology budgets.