FUTURE GOVERNANCE DILEMMAS INSIDE NAMIBIA'S BOARDROOMS. BY CHISOM OBIUDO

It is no surprise that corporate behaviour is generating unprecedented levels of scrutiny due to changes in the economic, technological and environmental landscapes. There is also a greater emphasis on ethical business practices and associated behaviours, reinforced by tighter regulatory frameworks.

The ripple effects of the Covid 19 pandemic brought about a wave of technological developments. As most companies adapt to the opportunities presented by technology, the emergence of cyber security issues and innovative business models should form part of their strategic focal points going forward. Companies who lack foresight face the danger of being blindsided in their strategy and decision-making because of all of these developments

In light of this, the following are my forecasts for the top three hurdles Namibian corporate boards will face in the coming years, as well as questions a company or its board of directors should ask in addressing these challenges:

1.     EMERGING TECHNOLOGIES

In July 2021, President Hage Geingob appointed an eight-member task group to prepare Namibia for the fourth industrial revolution. The Fourth Industrial Revolution (4IR) symbolises a new age of technological innovation to improve human-machine interactions, open new market possibilities, and boost global economic development.

We will soon see a disruption of existing business models and operational processes by new digital entrants in every industry. As a result, digital and emerging technologies will force businesses to fundamentally change their strategy, consumer reach, marketing, human resource efforts, and supply chain management.

According to PWC’s 20th CEO Annual Survey nearly a quarter of CEOs across the globe identified innovation, digital and technological capabilities as their top priorities over the next few years. However, the effect of technological innovations will vary depending on the type of company and industry.

The emerging technologies that will have the most significant global impact across industries are: Artificial intelligence, blockchain, the internet of things, robots, and augmented reality.

Therefore, if boards with “slow and steady wins the race” mindsets do not fill their technology intelligence gap, their companies will face stiff bottlenecks when investing and utilising new technologies and be overtaken by more agile and savvy players.

Questions to ask:

Are we using cutting-edge technology to identify and penetrate new markets?

Is the CEO actively leading the company's adoption of new technologies?

What will our customers expect of us in the future in terms of the technologies we employ?

What technologies are our competitors leveraging to connect with consumers and provide quicker services and experiences than we do?

What risks and opportunities do these technologies present? How does this create long term value for our organisation?

2.     Risk of fraud and cybercrimes

There have been reports of cybercrime and data breaches on international news sites. These incidents show that cybercriminals are becoming increasingly sophisticated in breaking through firewalls, selling credit card information, releasing confidential data and holding companies to ransom.

With the advancement of artificial intelligence, organisations are becoming increasingly vulnerable to fraud, scams, and security breaches directed against the company's executives, workers, and consumers.

Now that working from home has become the norm for some organisations, the risk of proliferation of ransomware and the Internet of Things (IoT) presents a whole new frontier of vulnerabilities, making the years 2021 and beyond a challenging period for companies of any sector.

In 2018, Deloitte conducted a cyber security survey of public and private organisations in Namibia. The findings revealed a lack of awareness of cybersecurity threats, no strategic direction and oversight for managing information assets, and the delegation of cyber security responsibilities to the wrong person.

This report is a cause for concern from a board governance perspective. A data security breach may have severe consequences for companies, including regulatory investigations, intellectual property loss, and financial risk from fraudulent transactions.

Therefore, governance advisors should ensure that the tone at the top exhibits a sense of urgency around cybercrime risks, which should trickle down to all company employees, as this is an existential threat to the organisation in the digital age and not just a problem affecting others.

The board holds the Chief Executive Officer (CEO) and Chief Information Security Officer (CISO) accountable, so a highly skilled and knowledgeable cybersecurity specialist is required to respond to cyber security risks.

The CISO should also embed their organisation's approach to cybersecurity within the organisation’s overall approach to enterprise risk management and should engage with board members to ensure they understand the issues at hand.

Questions to ask:

Have we as a board kept up on the most recent examples of threats that organisations in every industry have incurred?

Is the executive team able to articulate a clear and consistent view of cybersecurity risks related to the business?

Is the enterprise risk management program of the organisation adequately staffed and resourced in light of the risk types assessed?

Are there well-defined policies and procedures in place to address a data security breach?

3.     Climate Change

Previously, climate change was regarded as a distinct issue from the board's strategic responsibilities and not considered part of a director's oversight role. However, as the global pressure on governments to act on climate change grows, boards are encouraged to incorporate climate governance into their strategic and oversight duties.

The 2020 World Economic Forum Global Risk Report, identified extreme weather, climate action failure and natural disasters as the top three probable risks that could impact the organisation's sustainability. About three-quarters of respondents indicated that climate change impacts (such as drought, floods, fires, and global warming) have negatively impacted their business revenue.

In light of this, any corporate strategy recommended by the board should incorporate a range of possible climatic scenarios to reassure directors that their decisions would be resilient in the face of climate change.

It is also crucial that boards do not lose sight of their moral compass regarding ethical, purposeful, and responsible leadership. They, along with management, should function as stewards of the economy, society, and environment.

Such a sustainable governance culture will likely foster trust among management, employees, investors, and other stakeholders. Increasing the directors' responsibility to manage climate risk may also help create more climate-resilient companies.

Questions to ask

Is your company's board well-versed on climate change and how it may impact the organisation?

Has an evaluation of climate-competence gaps been conducted? If that's the case, who is leading the assessment and what were the suggestions.

Are environmental factors include in the strategic planning, business models, financial planning, and other decision-making processes?

4. How does your board stay informed about effective climate-governance practices?

To this end, as industries become more complicated and global competition intensifies, stakeholders and shareholders look on management's boards to be attentive, observant, and proactive in avoiding costly errors and misjudgments.

The speed at which expectations on company directors are evolving should prompt company directors to upskill and keep up to date on the legal and business environment to respond to and lead through change effectively.

Chisom Obiudo is a legal practitioner and corporate governance specialist. She currently serves as an advisory committee member to the board of VG Capital Partners. She holds a master’s degree in commercial law and specialised certificates in board governance and compliance.