BDO recently released its 2024 Board Survey, which polled nearly 250 public company directors to find out the most pressing opportunities and challenges for their boards. We spoke with Amy Rojik, national managing principal, corporate governance, for BDO USA, to explore the most significant risks to businesses in the new year, directors' impressions on AI technology and more.
Directors & Boards: Looking at BDO's 2024 Board Survey, what skills or levels of experience does it look like public companies and their boards are prioritizing for directors as we move toward 2025?
Amy Rojik: Our survey uncovers five priority areas where boards are seeking expertise for 2025: Technology implementation (31%), industry specialization (31%), cybersecurity (27%), audit and financial experience (27%) and corporate strategy (25%). It's a wide range of desired skills, but the underlying goals are sustainable, strategic growth driven by innovation and balanced with effective risk management.
DB: What do directors believe could be the most significant risks to their businesses in the new year?
AR: Directors consider a potential recessionary decline in demand and lagging technology concerns as the most significant risks (27%) to their businesses in the next 12 months. Liquidity and access to capital and cybersecurity closely follow in concern.
In response, many boards are engaging in scenario planning and developing customer service strategies to strengthen brand loyalty. This could mean adopting customer-centric pricing strategies, as seen with holiday promotions at major retailers or enhancing customer experience through technology. Directors are also identifying opportunities for tightening cost controls, optimizing investment strategies and exploring alternative financing options. This can include revising inventory levels, reevaluating travel expenses, and, where necessary, delaying capital expenditures.
Boards are also concerned about a heightened exposure to third-party risk with the expanded use of new and broadly available technology and the increased sophistication of cyber threats. As a result, diligent boards have become more heavily involved in working with management to stress-test and improve upon existing enterprise risk management strategies.
DB: What does the survey reveal to be directors' general impressions of AI technology? What do they see to be the opportunities and risks for their businesses?
AR: Directors view artificial intelligence — and particularly generative AI — as a lever for growth in areas like customer experience (16%), product development (15%) and marketing (11%) — but they also remain concerned about risks of inaccurate or biased outputs (19%), data privacy violations (16%) and potential impacts on employee morale.
To realize the full potential of AI while addressing these risks, boards plan to increase their investment in both emerging technology (51%) and cybersecurity (41%) in the year ahead. Focus areas may include enhancing AI oversight, engaging cross-functional stakeholders and setting clear policies to ensure responsible AI use across the organization. There is a human element here, too. Boards should continue to work with management teams to showcase how AI can be a true enabler to employees vs. a threat. Driving buy-in for responsible implementation across the organization will be key to avoiding the risk of falling behind competition with lagging or ineffective adoption of emerging technology.
DB: What are boards doing to prevent and detect fraud and better prepare their companies for a culture of compliance?
AR: Building a culture of compliance and strengthening fraud prevention and detection go hand in hand. Directors regularly review and discuss compliance materials in board meetings (43%) and monitor whistleblower reporting mechanisms (41%) to help encourage transparency and provide safe channels for reporting potential misconduct, while also discussing company-specific factors that could increase fraud risks (40%).
Establishing a no-tolerance policy (37%) and emphasizing accountability (36%) are also critical steps to ensure compliance is a collective responsibility across the organization. Directors are engaging in regular compliance training (35%) to stay current on policies and regulatory expectations and examining past noncompliance incidents (33%) to identify root causes to help management mitigate future risks. Efforts being expended by directors are not simply rooted in immediate risks and rewards but the data points more broadly to boards aligning long-term corporate strategy to invest in innovation and build a more risk-aware culture within the company.