- Indian Boards need to focus on embracing digital and preventing fraud: Report
Changes in the Companies Act, 2016 were significantly influenced by large corporate frauds reported globally including in India, casting significant responsibility on Company Boards, independent directors and auditors. Grant Thornton’s latest report, 'Boards of the future: steering organisations to thrive' highlights the findings of recent research and says that India Inc. identifies prevention of fraud and digital competency as key areas which should be the focus for Indian Boards.
The report warns businesses that despite uncovering a widespread commitment among today’s leaders to implement effective corporate governance practices, they cannot afford to be short-sighted if they are to meet the challenges and opportunities of the next decade. The report finds that simply focusing on the issues of today will not be enough, and that actively looking ahead and spotting challenges and opportunities of tomorrow is vital to ensuring the companies of the future survive, adapt and ultimately thrive.
“Like everything else the demands on Boards are changing and changing rapidly. External and internal forces including technological advances, regulation, demographic changes and globalisation are forcing organisations to ensure they are fit for purpose and able to compete in their target markets. Boards need to be structured and organised dynamically to respond to these changes as opposed to the traditional static approach. Those that do not heed to these changes will become history very rapidly. It’s time to take the wheel on corporate governance,” said Harish HV, Partner – India Leadership team, Grant Thornton India LLP.
Grant Thornton’s report identifies boosting diversity as a key challenge for Boards over the next 10 years. Nearly 88 percent respondents to its International Business Report (IBR) recognise their Board needs to do more to encourage more diversity. However, the report also finds that diversity needs to go beyond gender. It identifies a need for diversity of experience – arguably harder to measure than gender or ethnic diversity, but critical to guard against groupthink and encourage better decision-making.
The second key challenge identified is boosting digital capability, but evidence suggests there is a long way to go until this becomes a reality. Only 25 percent business leaders said that digital expertise is an area where their Board should increase focus over the next 10 years.
Nick Jeffrey, director – public policy at Grant Thornton, commented:
“Tackling both digital and diversity means thinking outside traditional spheres and engaging with people who can bring something new to the table. That can be achieved by setting up new cells of activity in hubs of innovation like Palo Alto or London’s ‘Silicon Roundabout’. But it can and must also involve better signposting – ensuring opportunities for all employees to become board members, rather than just a few. This will mean that boards of the future are made up of the best people for the job. To do this though, the net needs to be cast as widely as possible.”
The report makes the following key recommendations to businesses:
- Map the challenges you think you will face over the next decade. Map the skills you think you will need to address them. Identify the gaps you need to fill. But make sure you have a diverse group to do this effectively, to reduce the list of things you don’t know you don’t know.
- Prioritise the forms of diversity which you need to build on your board, in order to reflect your organisational culture, your markets and your customers.
- If there is no cyber strategy currently in place, waste no time in developing one. Then, if it isn’t already, make cyber strategy a standing agenda item for every single board meeting. Wave after wave of cyber-crime will become the norm, and staying one step ahead of the criminals will be a necessity.
- Collaborate. Establish cells in hotbeds of activity outside of your day to day activities. Don’t be afraid to admit there are things you don’t know, and that there are some challenges and opportunities you won’t see coming. Make the most of your supply chains to garner ideas and nurture the potential stars of the future. Think outside traditional spheres when it comes to digital threats and opportunities.
- Make it easier for the best and brightest talent from across your organisation to make it to the top. Use a board skills matrix, succession plans, mentoring and shadowing opportunities, and supply chains to boost signposting.
- Policymakers: embrace innovative initiatives. Encourage the cross-fertilisation of ideas across industries and borders.