Tech supporting boards’ increased risk appetites

Published on the 09/11/2021 | Written by Heather Wright

Boards embrace ‘more digital economic architecture’…

Boards of directors are looking to technology to support increasing risk appetites and changing capital allocation and governance to accommodate digital investment.

A Gartner survey of 273 directors or members of boards of directors, found digital technology remains a top priority for boards, with 58 percent flagging it as the single biggest strategic business priority.

One-third of boards are changing the metrics used to evaluate ROI from digital investments.

That’s down 12 percent on last year, with other priorities, including big movers workforce (52 percent) and ESG, health and sustainability (32 percent) making rapid gains of 86 percent and 100 percent respectively.

Partha Iyengar, distinguished research vice president at Gartner, says after heavy investment in digital over the past 12 to 19 months, enterprises are now taking a pause to validate their strategy and ensure ROI.

“For boards of directors, the core focus is now on technology integration and creating a more enduring and systemic digital economic architecture, where technology is infused throughout the business and drives business outcomes,” Iyengar says.

But he notes that those other priorities that are increasingly ultimately support digital business overall.

“Workforce concerns are closely linked with technology transformation. As enterprises accelerate their digital business initiatives, issues such as the IT skills shortages, the need to create a digitally agile workforce and culture transformation become that much more critical.”

In order to adopt more digital initiatives, boards are increasingly changing how their businesses function, altering the structure to ‘a more digital economic architecture’, Gartner says.

In practice, that means changing capital allocation and governance approaches to better accommodate digital investments.

Case in point: A full 40 percent of boards have moved digital business-related budgets to business functions, rather than a central technology or IT budget, while one-third are changing the metrics used to evaluate ROI from digital investments.

“Traditionally IT owned this budget; now it will play a role of facilitator, mentor and orchestrator to help functions deliver on outcomes and leverage technology budgets,” Iyengar says.

A Gartner report earlier this year noted that business technologists – that is, employees outside of IT departments who create tech or analytics capabilities for internal or external business use – are increasingly producing tech capabilities for users beyond their own department, and working with IT to do that.

Indeed, Gartner says its analysis shows organisations that successfully enable business technologists are 2.6 times more likely to accelerate digital business outcomes.

But while boards are shifting their focus to the role of technology beyond IT, CIOs remain visible as a key partner in board of directors’ digital initiatives.

As to the increased risk appetite, 57 percent of boards have increased or expect to increase their risk appetite heading into 2022, citing economic uncertainty, competitors’ disruptive business models and cost inflation due to supply shortages

Iyengar says the pandemic saw boards recognise that they needed to become comfortable operating in an environment of significant risk, as standing still wasn’t an option.

“This drove them to embrace the ‘try fast, fail fast approach’, and into 2022 boards of directors will continue taking risks such as making investment decisions with incomplete information, or making financial bets without upfront visibility around a guaranteed return.”

One big risk: Cybersecurity. Eighty-eight percent of boards now view cybersecurity as a business risk, up from 58 percent in 2016.

“In light of this, you need to think more strategically about presenting cybersecurity in terms of business risks and not technology,” Iyengar says.

“All function heads must be aware of the significant ramifications across the organisation.”

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