Five risk-related concerns boards and CEOs must manage in 2017: In this brave new world the challenge for companies is enormous, the possibilities are nearly limitless, and the risk of being marginalized is high.

Author:Dysart, Theodore L.
Position:HEIDRICK & STRUGGLES GOVERNANCE LETTER

Boards and CEOs will have their hands full managing potential risks in the coming year. Some of those risks, like cybersecurity, are perennial issues that will increase in intensity and urgency. Others, like the fallout from a rapidly changing political landscape, are of more recent vintage. But all of them, say the directors we talk with, will require acute attention. Five of the most critical include the following:

Digital Disruption. In almost every industry, digital technologies will continue to upset business models, alter the terms of competition, compress strategy cycles, and set in motion unforeseeable developments. Consider, for example, the explosion of interconnected computing power now transforming industry. Through the cloud, the Internet of Things (loT) connects billions of devices and machines that share information with other systems to make each device smarter and more capable. Meanwhile, artificial intelligence (AI) is rapidly changing the nature of work humans do--consider driverless vehicles or the fact that most legal discovery work today is done by computer algorithms.

Operating without emotion or ambition in networks, machines and algorithms can constitute efficient teams with or without people and work across product lines and P&Ls. These developments have profound implications for countries, workers, and companies. Japan, for instance, may be able to overcome the crippling effects of its low birth rate by using machines to compensate for the scarcity of young workers. In the U.S., up to 3 million truck-driving jobs may disappear.

In this brave new world the challenge for companies is enormous, the possibilities are nearly limitless, and the risk of being marginalized is high. Directors can begin to confront it by asking some high-level questions: How adaptable is the organization to address rapid technology-infused transformation? Will our organization's culture be a help--or a hindrance? Do we have the new capabilities and the acumen in strategy, technology, marketing, and communications to be the digital disruptor instead of the disrupted? We may see a partial answer to those questions in the convergence of the CIO, CTO, and CDO roles to spur customer-centric digital transformation throughout the organization.

New Levels of Cyber Threat. In a speech at the U.S. Naval Academy last year, James Clapper, then the country's director of national intelligence, said that the cyber threat had surpassed terrorism as the No...

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