Irish boards focussed more on cyber security and innovation, compared with European peers
Strategy, cyber security and performance top issues amongst Irish boards in coming year
Gender top diversity criteria for Irish boards
Awareness of cyber security issues is higher amongst Irish non-executive directors, compared to their European counterparts according to the first edition of the Deloitte EMEA 360 Boardroom survey: Agenda priorities across the region. Similarly, innovation is higher on the agenda amongst boards in Ireland.
Colm McDonnell, Head of Risk Advisory, Deloitte commented: “The shift in areas of focus provides a good insight into the mind-set of Irish boards, and indeed of Irish companies. Strategy is now the top priority indicating the boards and companies are taking a hard look at the future direction of their businesses. It is likely to become even more of a focus as companies look at the impact of Brexit on their businesses. Significantly more Irish directors highlighted strategy as the top issue facing them, compared with performance of the business (62% versus 42%). This suggests that the performance of businesses is not just stabilising, but improving also.”
The report highlights the views of non-executive directors across 20 countries in EMEA, providing a unique perspective on the issues boards of directors in the region are currently facing. Overall, the findings show that company boards appear to be adopting a more optimistic outlook for growth and competitiveness in the short to medium term compared to the recent past.
The top issues identified specifically by Irish board members for the coming 12-24 months are strategy, cyber security and performance. Issues that were identified as important over the previous 12 months were performance, regulation and compliance, and strategy – which were of equal importance, followed by capital management and IT/technology. Cybersecurity was identified as the sixth most important issue over the last 12 months.
Growing relevance of cyber security
According to the survey, cyber security has become a far more important issue for non-executive directors, ranking it far higher on their agenda for the next 12-24 months in comparison to the past year. In Ireland it ranks as the second priority, behind strategy.
When asked to rate board awareness of cyber risks on a scale of 1 to 5 (with 1 being low awareness), 65% of Irish respondents rated it a 4 or a 5, compared to 48% of respondents across the EMEA region. Similarly, 57% of Irish respondents said that their organisation currently had an action plan in place to deal with cyber security, compared with 46% of all respondents. Just 8% of Irish respondents, and 5% of all respondents, said they currently had nominated a board member as the cyber security expert with the remainder either believing that this was a matter for collective board responsibility or that management dealt with it.
“The importance of protecting their companies against cybercrime has resonated strongly with Irish boards, and it is positive to see this as a key focus over the coming months, jumping significantly in terms of priorities on their agenda. Boards should be taking a leading role in making sure companies are prepared. Directors need to ask themselves how well they understand cyber risk in the face of continuous and increasingly sophisticated cyber-attacks. Is the board fully educated on cyber risk, how to mitigate it, and the signs that might signal a breach? The board needs to ensure that the organisation’s critical information is fully protected,” said Colm McDonnell.
Innovation gains in importance
The results of the survey show that innovation is high up the board‘s agenda, particularly in Ireland. 77% of Irish respondents rated it highly (a 4 or a 5), compared to 60% overall. Significant differences between countries and industries emerged in the findings: in Germany, Ireland and Italy, where there is a clear government-led drive for innovation and a well-established start-up and entrepreneurial culture, innovation features highly on boardroom agendas. Here in Ireland, government support for innovation, start-ups and tax incentives, as well as an entrepreneurial culture are likely contributory factors. It is also prominent in the life sciences & technology, media and telecommunications industries, but less so in construction and energy & resources. Findings show that innovation appears to less of a priority on boardroom agendas in Austria, Romania, South Africa and Switzerland.
Product innovation was the area receiving the most attention of the board members in Ireland and amongst all respondents, followed by business model innovation. Digital innovation and marketing innovation is rated higher amongst Irish respondents compared to all respondents, who put process innovation ahead of these. This suggests that Irish organisations are more focussed on the impact innovation can have on the customer and end user, as opposed to the operational efficiencies that can be gained internally.
When asked about the future skills requirements for the board, knowledge of the industry (Ireland: 58%, EMEA: 74%) and strategic direction of the organisation (Ireland: 58%, EMEA: 69%) were among the most prominent indications of the interviewees. When asked about the criteria used to select board members, the top criteria amongst Irish respondents was gender (55%), followed by professional qualifications (46%). This was reversed across EMEA where 70% of respondents identified professional qualifications followed by gender, as identified by 55%. This is interesting as Ireland has no gender quota requirements in place, while in other countries such as Germany, Italy and Norway, criteria for boardroom diversity, particularly in relation to gender, is imposed by legal requirements or corporate governance code guidelines.
Success factors for an effective board
In general an effective board can only be built after very careful consideration of various factors: the acquired skills and knowledge of individuals, their character and their ability to maximise their strengths in combination with those of other board members, creating something which is greater than the sum of its parts. The respondents ranked their top requirements for an effective board: 32% experience, 28% diversity, 23% knowledge, 22% strategy focused and 22% transparency. For Irish respondents, while skills ranked as the top criteria, this was followed by good dynamics and trust amongst board members, and the ability to provide constructive challenge. This highlights that Irish non-executives place great importance on the culture and environment within the boardroom.
About the Deloitte EMEA 360° Boardroom Survey
The first EMEA 360° Boardroom Survey, conducted by Deloitte, asked 271 directors, the vast majority of them non-executive, across 20 countries in the EMEA region for their opinions about challenges facing boards with regard to several aspects of corporate governance: strategy & risk, innovation, cyber security, remuneration, talent & succession and board performance & evaluation. 26 non-executive directors in Ireland were included in the survey. The aim was to obtain the views of non-executive directors across different types of organisation and from a range of business sectors. The interviews were conducted during February and March 2016. The report incorporates quantitative and qualitative data based on these interviews.
The respondents’ views may differ to some extent according to whether their company has a one-tier or two-tier board structure. Of the 20 countries participating in the survey, 13 have a one-tier board structure, three (Austria, Germany and Poland) have a predominantly two-tier structure and the other four (France, Italy, the Netherlands and Romania) have both or other options available. Commentaries on any differences are highlighted throughout the report. Within the press release the differences are not included.
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