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From AI and cyber risk to geopolitics, productivity and talent, pressure on boards is intensifying. As business models are disrupted and expectations rise, the stakes have rarely been higher. Four experienced directors share the risks keeping them up at night, and why they matter now.
Directors arguably have more on their plates than ever before.
They are steering their organisations through an environment in which business models are being reshaped by rapid technological change and the energy transition; where the global free-trade system is giving way to tariffs and protectionism; and where overseas conflicts can have material impacts on organisations far from the front lines.
At the same time, directors are grappling with a growing compliance burden and heightened expectations from regulators, investors and the broader public.
For the year ahead, four directors outline what is keeping them awake at night.
Darren Steinberg FAICD - Non-executive director at real estate investor Qualitas and Sydney Swans
The first issue that keeps me awake is attracting and retaining key talent. With all the available knowledge everyone now has via technology, the only real differentiator in business is getting the best talent.
There’s also a risk on the AI front. An AI solution may be implemented, but a problem not identified because people rely on the AI to deliver outcomes without truly understanding what it’s doing. That’s more for down the track, but it’s something really imperative, particularly with younger people coming through.
If you think of older styles of work and learning on the job, we performed roles as we worked our way through the organisation. We understood how the “widgets” were created.
Today, many people use AI from the get-go. Do they truly understand what’s happening in the make-up of the business, or the business in which they are operating?
It’s imperative, as always, that you spend time in the depths of the organisation, meet with people at all levels and have quality time with them to see if they understand how the business operates and whether are all doing their jobs appropriately.
Peeyush Gupta AM FAICD - Non-executive director Magellan Financial Group, Dexus and Great Southern Bank, chair of Liberty
There’s one perennial risk that should keep directors up at night. In the short term, operational risk matters, but in the long term strategic risk is often the greatest threat. Strategic risk means changes to industry structure and the business model of an enterprise.
That’s the slow-burn, long-term, but very consequential risk I think should keep people up at night. It certainly does for me, from time to time.
Directors should proactively monitor industry trends and competitors, continue to invest in understanding evolving customer and distribution channel needs and preferences, and ensure product and service delivery remains aligned. They should also remain curious about what best practice looks like in key aspects of operational delivery and ensure that key cost metrics are competitive.
Productivity is a concern for our communities generally, and for corporate boards. Low levels of investment, capex and associated productivity are issues of concern, but in an economy where top-line revenue growth is somewhat anaemic, this becomes quite challenging.
One productivity issue is the burden of compliance, and that’s absolutely on my mind. In fact, the AICD has just published a report commissioned to review this area and produce data on the costs or burden of compliance. It came up with the startling figure of more than five per cent of GDP.
Directors should respect the intent of compliance requirements, but think independently about how best to comply given the firm’s context. They should also invest in data, their tech stack and operations to build compliance by design.
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Anthea Roberts - Professor of global governance at the Australian National University, founder and CEO of Dragonfly Thinking
For most people who have become directors over the past 10 or 20 years, it’s been a period of globalisation where geopolitical confrontation has been low and the climate relatively settled.
What we’re seeing now is rising geopolitics and — not just with AI but also with the clean energy transition — a range of issues disrupting traditional ways of doing business and making the environment much more turbulent.
We’re seeing much greater interest from boards, not just in what geopolitics means for their business and strategy, but also in how to even begin thinking about these complex and interconnected issues they didn’t previously have to worry about.
Geopolitics is now deeply entangled with business and the clean energy transition. Dealing with that level of interconnection is something boards in Australia and overseas are really struggling with.
You can’t answer these questions by looking at them only through an economics, security or IT lens. We actually need to develop ways for people to think systemically across these interactions.
Judith Fiander - CEO of Australian Philanthropic Services
Directors are under such onerous obligations in terms of care and support for all staff members. They are very aware of ensuring there are good standards within an organisation — good HR arrangements, good protections and support for staff, professional development for staff, and good risk management.
It’s always about people, the greatest asset and the greatest risk.
Cyber risk grows by the day.
Directors each have a personal duty to ensure cyber risks are being appropriately managed. Having cybersecurity as a standing item for each board meeting is a good start, but that is only helpful if the right questions are asked and answered. Ensuring risk is assessed — and the right systems, policies and training in place — is an ongoing task.
Directors need to understand what kind of sensitive information is being held by the organisation and how it is stored. What is the planned response if, or perhaps when, the business is successfully targeted? How often is training undertaken and reinforced? Does the business have enough resources devoted to managing cyber risk on an ongoing basis?
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