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What a year!? What was before ‘work in progress’ and in the ‘nice to have’ column on board skills matrix is now a priority for companies who are committed to building the ‘next normal’.
With 2020 being characterized by the Covid-19 pandemic and persistent and pervasive racial inequity, existing business strategies and related key performance indicators (KPIs) are being pressure tested.
At the same time, clear data is being generated from what is possible: who makes production and productivity happen, how contactless technology can promote public health – while also supporting B2B and B2C transactions.
When examined, the data points to how dependent the ‘past normal’ was on continuing to foster economic and social gaps along value- and supply-chain logistics. These chains are key elements of economic growth and managing volatility in national, regional, and the interconnected global economy.
In building the next normal, there will be a separation of ‘leaders’ from ‘laggards’ across industries, and within industries.
Good leaders never let a crisis go to waste. Executives and company board directors who pivoted in March 2020 to products and services that also supported improved health and safety for staff, whilst living up to their duty of care, loyalty, and oversight accountabilities are charting the path forward with business resiliency embedded to create value.
Maintaining a leadership position will demand critical analysis of the post-March 2020 data, especially that which clearly shows that the negative economic and social impact was deeper and more pervasive in specific communities, i.e. Black/African American, Latinx, and indigenous people.
‘Not letting a crisis go to waste’ means that now is the opportunity to make changes in strategy, shifting what was ‘nice to have’ to the ‘must have’ column. Investors, employees, and customers are each insisting that companies accountably embed responses to the pandemic, racial inequality and climate change to be credible and to be agile, innovative, and resilient to future shocks (within the next five years!).
Communication technology now puts a premium on companies to align words/messaging and actions. It takes only a few clicks for any misalignment to be known and acted upon locally and across thousands of kilometres/miles in several languages.
Investors, current and prospective employees, and customers can quickly screen-out ‘laggard’ companies.
If 2020 has been clear about anything, it is that the assumptions of the ‘past normal’, having been pressure tested, will be the source of one of the highest costs for businesses going forward – potential loss of financial value and more hostile M&A
However, the topic of board director diversity has seen conspicuously little change – despite researched evidence that diverse teams make better decisions because of the different viewpoints each team member brings to challenges. What tends to be overlooked is the significant cost of single-group teams which tend to perpetuate assumptions about norms and aspirations.
If 2020 has been clear about anything, it is that the assumptions of the ‘past normal’, having been pressure tested, will be the source of one of the highest costs for businesses going forward – potential loss of financial value and more hostile M&A.
The industry which cuts across all other industries – financial services (banking, insurance, credit unions, credit card companies, consumer-finance companies, stock brokerages, investment funds) is instrumental here. Board diversity should be a priority in order to ask strategic questions about how different groups readily access finance and how patterns of finance use differs – or is similar – across groups. There are strong implications here for finance and investment product innovation and a focus on Fintech for product delivery.
The financial services industry transparently taking on board executive diversity is also critical to that industry being able to credibly engage client industries and companies to become positive actors in economic transformation that focuses on accomplishing the work of closing economic and social gaps.
Although banking systems and financial reporting governance differ around the world, boards must also respond to the forces of change in public policy, which are increasingly now apparent.
For example, Canada requires the evaluation of climate risks as a condition for receiving its Covid-19 bailout funding.
The EU’s Non Financial Reporting Directive is moving forward intentionally at pace. And the US Department of Labor has been involved in clarifying the rules about environmental, social, and governance investment fund practices.
The boardroom is where challenging, uncomfortable conversations can be had about the relevancy of existing “materiality assessment”, the assumptions of a company’s internal capital allocation models, and the disruption of talent recruiting and retention practices.
A diverse board of directors, with at least three directors from the most adversely impacted social groups outlined above, can most effectively align messaging, action, and value creation.
Leaders of the next normal know that ensuring that their board director team reflects the diversity of communities which have been most adversely impacted by public health and racial inequity events of 2020, is pivotal to having on-board essential thinking about how to build resilience in a manner that enables the company to grow through the volatility of future economic and social shocks.
Joyce Cacho is an experienced board director in the banking/fintech industry, chairs the operations committee of the Supervisory Board of World Benchmarking Alliance, is a Qualified Financial Expert and president of Adinura Advisory Services.