Audit Committee Leadership Summit, October 2020
As the COVID-19 pandemic spread across the world, business leaders realized the need to rapidly adapt operations—supply chain, sales, communications, infrastructure, and more—and many have dramatically increased the pace of digital innovation as a result. For some firms, fast-tracking digitalization may be a matter of survival; for others, the urgency created by COVID-19 offers an opportunity to leapfrog peers, reimagine operations, or advance long-standing transformation goals. Yet even in the best of times, any complex technology project can carry significant risk, and the current environment raises those stakes further. Boards face the challenge of ensuring effective and vigilant oversight as innovation proceeds at a faster tempo.
On September 18, 2020, members of the North American and European Audit Committee Leadership Networks (ACLN and EACLN) met virtually to discuss how large global firms can best lead and govern accelerated innovation. They were joined by Netta Nyholm, EY EMEIA enterprise risk and risk markets leader; Kate Smaje, global leader at McKinsey Digital; and David Gledhill, recently group chief information officer and head of group technology and operations at DBS.
Several themes emerged regarding how companies and boards are overseeing accelerated digital innovation.
The pandemic is driving companies to fast-track digital innovation
Guests and members highlighted a variety of ways digital innovation has accelerated during the pandemic, including not only the increased use of technology but also broader efforts to break down internal barriers and move at speed. Though survival of the business amid crisis is a key driver behind much of the innovation, other factors are also at play, such as gathering data and intelligence, responding to accelerated customer trends, and pursuing emerging opportunities to push the business forward.
Mitigating the risks associated with accelerated innovation
Members have been pleased with the more agile approach their companies have taken with digital innovation, but also highlighted risk concerns and discussed approaches to dealing with these. Boards and audit committees should continually assess risk management practices and should be looking back at actions taken in recent months to determine whether additional risk management work needs to be done. The current pace of change and shifting work environment also raises challenges associated with employee wellness and corporate culture, issues boards should carefully monitor.
Strategic priorities amid rapid innovation
Boards can play a vital role in ensuring that innovation is directly aligned with strategy. As more companies are able to widen their strategic focus from immediate survival to longer-term growth, they will be doing so in a world in which customer expectations and behaviors may have permanently changed. It may be necessary for companies to reassess long term strategic plans and rethink talent strategy as they adapt approach. Major digital projects should be carefully monitored by the board to avoid the danger of pursuing innovations that do not align with long-term strategic goals or may not achieve promised value.