Prevailing against uncertainty: the board’s role in building resilience

In the keynote address, Irene Dorner, Chair of Control Risks and former CEO and President of HSBC USA, told the room - companies should avoid trying to be “ready for everything”, when it comes to risks in the current business environment, and instead focus on being “ready for anything”. She advised on the real advantages to this resilience approach. “Companies that can anticipate risks and respond to them better gain enormous competitive advantage over those who don’t or can’t.”

Read our round-up of the two panel session discussions below.

5 key takeaways for boards - building resilience in the face of new and emerging risks

1. Tackle emerging risks as a priority

• Boards cannot devise a response plan to everything that might go wrong – so must focus on the emerging risks.
• These emerging risk areas should include cyber threats, security, deglobalisation, regulatory and operational risk.

2. Best approaches to anticipating risk 

• Risk reviews can be structured around future scenarios occurring at different timeframes and stress testing the business to see how it might respond.
• Alternatively, boards are creating a risk register of emerging risks and ‘unknowns’ which are then observed and re-evaluated at regular intervals, using a matrix judging how near they are in time and physical proximity.

3. Focus on operational resilience

• Disclosure demands mean that many companies are effective in their financial resilience but far less so in their operational resilience.

4. Stakeholder capitalism means broader risks

• The panel warned boards that the introduction of stakeholder capitalism makes risk management and resilience a much broader topic to address. A shift in metrics from financial to non-financial – including carbon emissions – has broadened risks further.

5. Prioritise boardroom skills and education

• Boardroom skills fit for the current risk environment are critical – but boards often lack skills and knowledge in digitisation and ESG.
• The ever-changing risk landscape has also shifted attention to the importance of board education and refreshing of skills to suit.
• Artificial intelligence was also cited as an area not yet well understood at board level with governance structures to manage advancements in that area also lacking.

Read more detailed commentary on the discussions here.

5 key takeaways for boards -the evolution of ESG risk and resilience

1. Boards need more complete ESG data and information

• Boards are still not receiving enough data about ESG - Chris Fuggle revealed latest research that indicate 39% of boards believe they do not receive enough information about ESG to fulfil their obligations.
• Such clarity of data and information is key to enable decision making – and boards must develop a deeper understanding of their own business’ “drivers” in moving towards an ESG agenda.

2. Knowledge and understanding of environmental issues is essential

• Awareness raising and increasing understanding is still a big issue – and it is important for boards to have generative and constructive conversations about a response to the climate emergency.
• There appears to be a significant gap of expertise and understanding on boards to be able to tackle the full complexities of climate change. Boards should look to include experts in discussions to fill holes in knowledge.

3. Making commitments regardless of growth

• Whilst awareness and action around climate issues were seen as essential to business resilience - the panel also reflected on a warning: companies may have to consider that transitioning to net zero may involve some years with reduced growth, whilst necessary changes are made within the business.
• Concern was noted however around the role of investors in supporting such transitions.

4. Leadership is integral to effective ESG and business resilience

• Effective leadership is absolutely essential to making progress on climate change and other ESG issues. And leaders must learn to manage with less certainty and information than they are used to in these changing times – while current structures and systems catch up.

5. Incremental change can be made now – don’t wait for ‘perfection’

• Our Global Head of Sustainability, Chris Fuggle has reflected on the discussions held around ESG: “There will of course be front runners in sustainability but perhaps only the minority will completely transform their business as a result. For the rest, what’s important is that they quickly understand which ESG drivers, and topics, are relevant and that they address these in a way which balances current business needs, wider stakeholder needs and longevity. Incremental progress on ESG from the majority may outpace the procrastination caused by seeking transformational change from day one. It also provides a great learning opportunity for bigger moves in the medium term.”

Read more detailed commentary on the discussions here.

Panel session 1: Building resilience in the face of new and emerging risks

Guest speakers

Panel session 2: The evolution of ESG risk & resilience

Guest speakers