By Cyril Shroff
Corporate boards are undergoing a defining shift in today’s volatile landscape. They are turning into survival sentinels and going over and beyond their customary governance roles. From observing how generative artificial intelligence (GenAI) is shaping business models, geo-legal risks impacting global transactions, to preserving reputation by staying on the right side of the social media minefield, the board’s role today has become existential.
Boards as risk navigators
One big ask from the boards is to anticipate risks and guide organisations to navigate those proactively. Boards are expected to manage geopolitical, legal, and technological risks, transcending domestic boundaries. This responsibility is dubbed “dragonfly thinking”—drawing on the insect’s ability to see in all directions. Today’s risks are broadly categorised into the following heads:
Geo-legal risk: This is an emerging risk confronting corporates. Aside from the political consequences, this risk impacts commercial contracts and other obligations. For example, the recent Chinese directive asking Apple engineers to exit the country had more than political implications. Direct board oversight can help mitigate such risks. India is also facing such geo-legal issues on account of regulated investment climate (Press Note 5), impacting cross-border deals. Boards must stay alert to counter the ill-effects of such dynamics.
Gen AI risk: Going beyond the anticipated disruption, GenAI is rewriting the rule book of businesses. It has a profound impact on legal and professional services. Hiring by the Big Four was slashed by 40%, a sure sign of AI-led displacements. This calls for boards to formulate a coherent AI strategy together with the CEOs.
India’s high expectation risk: To reach the $30-trillion target by 2047, India needs to grow at 6-7% annually. But Indian GDP is predicted to fall a tad bit in 2025. Boards are required to frame strategies that take into account the potential impact of this predicted slowdown on businesses.
Hostile takeover risk: Though rare, hostile takeovers are no strangers in India. In cases where family ownerships are fractured or where partners have fallen out of joint ventures, hostile takeovers may occur. Therefore, boards have the job to review ownership structures and limit the risk of such takeovers.
Business continuity and succession risk: India’s economic liberalisation opened the country to private and foreign investments and fostered the growth of many new companies. More than 30 years later, many of those companies have shaped into conglomerates and today find themselves at the cusp of generational leadership transition. Boards have the responsibility to guide businesses through this transition.
Climate change and insurance risk: India is facing simultaneous floods and drought-like situations, which is why companies are seeing rising insurance costs. In the days to come, insurers may step back from certain types of climate-related risks altogether. Boards have to find ways to insure against these kinds of calamities, which are constantly changing their composition.
Cybersecurity and data privacy risk: The more financial data a company has, the more vulnerable it is to cyberattacks. Payment companies, credit card companies, banks, and financial institutions have been at the receiving end of cyberattacks. Even law firms have not been spared. Addressing this risk should be very high on any board’s agenda.
Environmental, social, and governance risk: The corporate culture of an organisation continues to be very important. The modern workplace has no place for discrimination or harassment. In an era of aggressive social media communications and presence of alert proxy advisers, poor work culture or any wrong step can hurt investor sentiments. Boards must conduct regular audits to ensure sustainability and inclusion factors are embedded into the culture of the organisation.
Strengthening governance structures
This brings us to the question of the governance structure for listed entities. Here are a few suggestions that can be relied upon: First, records of internal boardroom conversations must be kept as they can provide strategic protection against possible litigation or shareholder scrutiny. Second, dedicated risk committees and crisis management teams must be set up, and chief risk officers should be hired. Third, CEOs and boards must jointly own strategy. Fourth, independent directors should be involved in annual/bi-annual/monthly risk calibration sessions—their acumen can help reveal blind spots. Lastly, arm’s-length checks on related-party transactions should be reinforced.
The message to the board is clear—rewire your mindset and adopt dynamic visioning capabilities to solve problems. Today, risks move faster than the agendas that company boards have traditionally addressed. Worse, they have grown opaque, and only a wide-eyed board that can make rapid directional changes and navigate uncertainty with precision is likely to emerge the strongest.
In times of dragonflies, blink at your own risk!
The writer is managing partner, Cyril Amarchand Mangaldas.
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