Home > Estructura del Consejo > Who should sit at a Board: technology capabilities a board should have (II)

Who should sit at a Board: technology capabilities a board should have (II)

In a precious post (https://joaquinbarquero.wordpress.com/2013/03/28/who-should-sit-on-corporate-boards-i-industry-experts/), we refered to the industry expertise, as an asset a board should have if it is to perform well. We follow the path of this previous post in this one, as to the competencies boards should have.

“What should directors know to ask the right questions about technology?” This seems to be quite a usual question in lately published press articles and other related Governance forums or events, and so Elizabeth Valentine comments in her. (1)

She defends there is a need for directors understanding risk and opportunity in Technology Governance. According to her, many boards simply consider technology a tool, but not their business; she argues they should at least be able to ask the right questions about infrastructure risk, business continuity risk, security risk or IT competence risk, and of course IT projects risk.

 

Technology underpins every part of a business nowadays. And boards have a fiduciary duty for competence, even for technology and technology Governance, she asserts.

 

So, what is Enterprise Business Technology Governance?

 

According to Mrs. Valentine, it means “governing technology and information as assets, on value creation and competitive performance oversight against a technology backdrop. It includes the leadership, oversight and board mechanisms for governing information and technology at an enterprise level.” (2)

 

As Deloitte points out the way each firm uses technology determines or conditions the IT oversight role of each board. (3)

 

Firms may use technology differently, some may consider it as a commodity, but some other may need to consider it as a strategic differentiator:

 

  1. Some firms use it as a support mechanism for some functions or departments.
  2. In other firms, IT supports the Competitive Advantage.
  3. In some other IT provides the Competitive Advantage.
  4. Finally, in other companies, IT is the business.

 

Firms in bullet 1 probably assign technology to IT department or the Audit Committee. In case of bullet 3 firms, they often create a Technology committee, whereas in bullet 4 all board members need to be involved in technology. These differences also affect the number of technology-literate directors each board should engage, (just one could be enough in bullet 1, but all directors should have the technology skills in bullet 4 firms).

 

What areas are the most affected by technology?

 

Apart from tools at the board`s disposal, (communications, whistle-blower platforms, data analytics for decision-making…), the following matters need to catch the directors attention:

 

  1. Risk discussions: risk controls are facilitated by technology; business continuity and security risk are also affected by technology; also, IT operational or strategic risk need to be considered.
  2. The firm`s strategic debate: as an integral part of the business, directors need to understand how IT helps value creation processes, so as to promote every necessary input for the sustainability and wealth creation of the firm.
  3. Large IT projects: large investments, a product development dependency on IT, or some other similar situations recommend that an effective oversight is imposed on large IT projects.
  4. A relationship with an IT manager, similar to the one usually kept by boards with CFO for financial matters should also be maintained by the board; this would help directors exercise their oversight role, and also help them learn and acquire the necessary skills.

 

Given its growing importance and press and research coverage, we will more deeply analyse cyber-security risks in an incoming post.

 

(1)    Enterprise Business Technology Governance, http://www.enterprisegovernance.com.au/, in her article “Boards and technology: Is scrutiny of director`s technology competence getting closer?”.

(2)    Do Boards know enough about technology to ask the right questions?, also in Valentines blog.

(3)    Deloitte, “The Tech-intelligent Board: Priorities for tech-savvy Directors as they oversee IT Risk and Strategy”, 2011.

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  1. joaquinbarquero
    June 8, 2014 at 1:00 pm

    In “The Role of the Board in Technology”(1), Jack Milligan, editor at the Bank Director Magazine, states the need that directors understand technology`s impact on a company`s performance and profitability.

    Although he focuses in the banking industry, what he says applies to other (if not most) industries. The industries change fast, and in many occassions change is driven by technology. Consequently, any strategy discussion needs to involve technology:

    – First, investment allocated to technology increases with time, regulation, economies of scale, the increase of cyber security risks, etc.
    – Second, impact of technology in the customer experience, thus in the company`s business needs to be clearly understood and, if possible, anticipated,
    – Intersection of strategy and technology will become more and more important; barriers and business definitions are going to nbe altered; just take the example of the banking sector, and the increase of new entrants in parts of its previously considered core business, (such as payment methods, etc).

    (1) http://www.bankdirector.com/board-issues/technology/the-role-of-the-board-in-technology/

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