Seizing opportunity from uncertainty: Risk management and leadership tips for 2023
2022 was the year crypto crashed, the metaverse underwhelmed and NFTs moved from bubble to broke — and this was just in the technology sector. Economic turmoil, bad decisions and high-profile management failures abounded across industries.
But the disruption didn’t rattle all organizations. Boards and management that prioritized organizational resilience found opportunity in the chaos and are heading into 2023 with a heightened ability to capitalize on the challenges that await. And on the frontline sits a new breed of leader. These CEOs excel at adapting and can clearly delineate aspirations for the company’s future, making them significantly more likely to succeed.
In short, changing — and challenging — times call for adaptive leaders. Below, we highlight 5 key tips for building a resilient organization in 2023 — and beyond.
1. When crisis strikes, seek reasons — and paths forward.
Amid a maelstrom of external threats lie very real concerns about internal processes falling behind. In 2022, director confidence dropped almost 25% and fell into the “weak” category for the first time since September 2020, according to our What Directors Think survey by the Diligent Institute and Corporate Board Member.
The 25% decline in confidence comes down to one word: risk.
Supply chain issues, cyberattacks, evolving regulations, market volatility and social responsibility issues are not only challenging risk and compliance professionals, but keeping directors and leaders up at night too. In order to get ahead of these risks, building knowledge is crucial. Leaders need to start by investigating the root causes of crises. Look at the company’s vulnerabilities and limitations, then anticipate what the future might bring. Map out a path forward, including how you’ll pivot and course correct as needed. Also determine how you’ll respond to inevitable developments outside of your plan and how you’ll scale your response across the organization.
Building a strong knowledge foundation will allow adaptive leaders to not only respond to what’s going on, but also quickly determine the why — and act accordingly.
2. In DE&I, look beyond granular goals to skills-based empowerment.
Success is unquestionably accelerated by bringing more diverse perspectives and experiences into the organization, starting at board level. Yet DE&I has become a math-intensive endeavor, rife with detailed percentages and complex benchmarking against peers using a limited set of factors. By focusing too heavily on these metrics, many companies are missing the forest for the trees, and missing out on opportunities as a result. Often overlooked in the quest to achieve DE&I goals is the importance of diversity of skills.
Our Diligent Board Diversity Gaps report confirms the importance of skills-based diversity, with nearly half (48%) of directors seeking to fill a specific area of expertise for new board members, rather than purposefully selecting a candidate based on race, gender or age.
Adaptive leaders avoid this mistake by keeping a close eye on the external landscape, scanning candidate networks and data sources within and outside of their industry. Collecting the right DE&I insights allows these leaders to identify clear priorities, objectives and expectations for the entire organization, while also identifying the necessary skills to achieve those objectives and empowering their workforce to work toward them.
3. Embed ESG across the organization.
2022 was a year filled with ESG pushback and debate, yet amid rumblings of declining support, today’s leaders still recognize it as a key priority. In our survey, 71% of directors said they incorporate ESG metrics into overall company strategy. ESG metrics also show up in areas such as integrated risk management (52%), director appointment criteria (48%) and executive compensation (46%).
Shareholder activism in 2022 also sent a clear message reinforcing the importance of ESG: Investors and activists crave consistency and reliability when it comes to ESG issues and how they generate business value. At the same time, regulations like the recently passed Corporate Sustainability Reporting Directive in the EU and the SEC’s anticipated final ruling on climate disclosures will continue to keep ESG high on the list of challenges faced by today’s organizations.
Forward-thinking leaders will address these demands by keeping close to stakeholder expectations and realigning internal focus. And they’ll act decisively through strong organizational and planning skills that take ESG into account; through a thorough understanding of critical sustainability, diversity and governance data; and through a culture of accountability, transparency and flexibility.
4. Expand — and evolve — cyber oversight.
Agility, consistency, decisiveness — effective cyber oversight requires all of these traits and more. Gartner predicts that by 2025, nearly half (45%) of organizations will have experienced attacks on their supply chains, a threefold increase from 2021.
As it’s impossible to anticipate every potential threat, successful leaders will prioritize cyber investments that protect business outcomes and their customers. They will also keep an eye on regulations. In our survey, a majority of directors (63%) said their board had discussed the SEC’s proposed rule change related to cybersecurity disclosures, but only 18% said they were restructuring their strategy and practices. Even fewer were planning to hire new talent (8%) or onboard a new director with cybersecurity expertise (4%).
Evolving cyber risks demand countermeasures that evolve just as quickly, if not more so. True cyber resilience requires forward-thinking leaders to not only be aware of emerging threats and new regulations, but to formulate a plan and make strategic infrastructure and human capital investments that keep their organization safe at all levels.
5. Build a future-ready team.
In cybersecurity, ESG and beyond, successfully navigating chaos starts with people. Getting the right team in place quickly can make a huge difference, especially as the speed of business and demands for change continue to increase.
The directors we’ve talked to are prioritizing leadership and board succession. When recruiting this next generation, there are many criteria to look for: agile thinkers with multiple skillsets, connection-builders ready to form meaningful relationships with diverse stakeholders, and resilient candidates able to pivot and execute at the speed of change.
Such a team — and such a mindset — is essential for the organizations of today to weather the challenges of tomorrow, whatever the future might bring.
To find out more about what lies ahead in the next 12 months — from new threats to emerging opportunities — download Diligent’s 2023 Outlook report now.
