Prioritizing board agendas for 2020 will require a balance of near-term focus, agility and long-term thinking. Based on our work with directors and business leaders, we've identified key issues for boards to consider as they refine their agendas to respond to the risks and opportunities in the year ahead. Below we highlight three areas for board focus.
Link boardroom discussions on strategy, risk and global disruption. Trade wars, Brexit, rising populism, cyberattacks on critical infrastructure, and the threat of military conflict in geopolitical hotspots--combined with an absence of global leadership and the deterioration of international governance --will continue to drive global volatility and uncertainty. As Eurasia Group's Ian Bremmer noted, this environment "will require more investment in scenario planning and stress testing. It also means drawing up contingency plans to shorten supply chains, cutting long-term fixed costs and limiting business exposure to political relationships that have considerable potential to go south." Companies also need to address the potential disruption to business models posed by advances in digital technologies such as robotic process automation, machine learning and artificial intelligence. Are the company's risk management processes adequate to address the speed and disruptive impact of these advances, and to assess the continuing validity of the assumptions that form the basis of the company's strategy and business model?
Help management reassess the company's processes for identifying risks and opportunities posed by disruption--geopolitical, technological and digital, social, and environmental--and their impact on long-term strategy. Is there an effective process to monitor changes in the external environment and provide early warning that strategy adjustments may be necessary? Help the company test strategic assumptions and keep sight of how the big picture is changing. Disruption, strategy and risk should be hardwired together in boardroom discussions.
Build boardroom talent around the company's strategy and future needs. Boards are increasingly focused on aligning board composition with the company's strategy, today and long term. Boardroom talent and diversity are also front and center for investors, regulators, and other stakeholders. That said, the world is changing markedly faster than boards.
According to Spencer Stuart's 2019 U.S. Board Index, board turnover among S&P 500 companies remains...