57% Boards of Directors increasing their risk appetite moving into 2022: Gartner

A majority of Boards of Directors (BoDs) have increased or expect to increase their risk appetite moving into 2022, according to a new survey from Gartner, Inc.

According to the survey, 57 per cent of BoDs have increased or expect to increase their risk appetite.

BoDs cite economic uncertainty (38 per cent), disruptive business models from competitors (35 per cent) and cost inflation due to supply shortages (28 per cent) as the top risks to business performance.

“During the pandemic, BoDs recognized that they needed to become comfortable operating in an environment of significant risk, as standing still was not an option,” said Partha Iyengar, distinguished research vice president at Gartner.

“This drove them to embrace the ‘try fast, fail fast approach,’ and into 2022, BoDs will continue taking risks such as making technology investment decisions with incomplete information or making financial bets without up-front visibility around a guaranteed return," Iyengar added.

Digital initatives

BoDs also remain highly committed to digital technology initiatives, which was ranked as a top strategic business priority by 58 per cent of survey respondents. However, this is a slight decrease from the 2021 survey.

“Having invested so much in digital business over the past 12 to 18 months, enterprises are taking a pause to validate their strategy and ensure ROI,” said Iyengar.

“For BoDs, the core focus is now on technology integration and creating a more enduring and systemic digital economic architecture, where technology is infused throughout the business and drives business outcomes," Iyengar further said.

The survey further found that 64 per cent of BoDs have attempted to change their enterprise economic structure to a more digital economic architecture.

BoDs are changing their approach towards capital allocation and governance to accommodate digital investments.

For instance, 40 per cent of BoDs have moved digital business-related budgets to business functions, rather than a central technology or IT budget while one-third of them are changing the metrics used to evaluate ROI from digital investments.

"While Boards are shifting focus to the role of technology beyond IT, CIOs remain visible as a key partner in BoDs’ digital initiatives," the report said.

Technology subcommittee

34 per cent of BoDs reported having a formally constituted IT, digital or technology subcommittee, while a significant majority (94 per cent) among them include the CIO or CTO as a member.

Additionally, workforce issues were among the top strategic priorities for 52 per cent of BoDs, representing an 86 per cent increase in interest over the 2021 survey.

“Workforce concerns are closely linked with technology transformation. As enterprises accelerate their digital business initiatives, issues such as the IT skills shortage, the need to create a digitally agile workforce and culture transformation become that much more critical," said Iyengar.

Environmental, social and governance (ESG), health and sustainability completed the list of top three BoD priorities, up by 100 per cent from last year.

The survey found that 30 per cent of BoDs reported that their organisation publicly engages in leading social or political issues, while nearly half of BoDs (45 per cent) have diversity, equity and inclusion (DEI) on their board meeting agenda at every board meeting or quarterly.

The 2022 Gartner Board of Directors Survey was conducted online from May through June 2021 among 273 respondents in the US, Europe and APAC in a board of director role or a member of the corporate board of directors.

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