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Compliance

How boards can manage the risks of emerging technologies

Boards need education and structural changes to keep up.
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4 min read

There will be “more changes in the boardroom in the next 12 to 18 months than we’ve had in the past decade,” Nora Denzel, lead independent director at Advanced Micro Devices, predicted during a press roundtable last week at the 2024 National Association of Corporate Directors (NACD) Summit. Emerging technologies are the reason why.

Denzel is a co-chair of the 2024 NACD Blue Ribbon Commission, which recently released a report centered on technology. It presents 10 recommendations for technology governance, which the authors viewed as an area of pressing concern for boards.

Right now, we’re seeing “the biggest change in technology in the past 50 years,” Denzel said. “And I know some people think it’s overhyped. I think it’s actually underhyped.”

She added, “I think this is going to have societal-level impact on how we work, how we play, and how we live.”

Technology presents risks boards need to deal with right now: Regulation has yet to catch up with emerging technologies like AI, Denzel noted, placing the imperative on boards to set guardrails around their companies’ use of technology. “We’re going to have to self-govern before the real governance comes in,” she said. “This is not a compliance issue,” she added. “It’s about protecting your reputation before there are government rules” in place.

New technologies are especially risky because they’ve increased access to data at all levels of a corporation, David Kenny—co-chair of the commission, board chair elect at Best Buy, and executive chair at Nielsen—said at the roundtable. “Now the information is becoming much more liquid, and it could get to people in a way that is usable to make legal decisions, HR decisions, pricing decisions, product decisions,” he said.

At the same time, companies need to pursue new technologies or risk losing their competitive edge, Kenny said. As he put it in a press release on the report, “the biggest technology risk now is failing to adopt emerging technology.”

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Boards need more tech fluency: Among its recommendations for how boards should approach technology, the commission said tech matters can no longer be delegated to a single board member with tech expertise. (As one commissioner said, “Getting someone from Silicon Valley is not a solution to increasing board tech fluency.”) Board members need to know enough about new technologies to be able to assess their second-, third-, and fourth-order implications, the commissioners suggested, and they should continuously strive to learn more. They also recommended that boards assess their tech knowledge and that it be made part of directors’ evaluations.

Tech needs a bigger seat at the table: Boards may want to rethink their structure and the cadence of their meetings to better address the risks that new tech brings, the commission suggested.

“Technology oversight must become a recurring, mandatory responsibility within each standing committee,” the report’s authors wrote.

Boards may also want to make changes to their structure, perhaps adding a technology committee or subcommittee, the commissioners said.

Boards should set guardrails: Boards need to ensure that technology is aligned with their companies’ purpose, values, and long-term strategy, the commissioners suggested, which “establishes parameters for acceptable use.” They can set guardrails around lines the organization won’t cross, Denzel said, such as confirming that it will never sell data or that it will always disclose when AI is being used in performance reviews.

Boards should outline their role in technology oversight, the commissioners suggested, clarify who the decision-making authorities are, and determine what metrics will be used to evaluate tech governance.

News built for finance pros

CFO Brew helps finance pros navigate their roles with insights into risk management, compliance, and strategy through our newsletter, virtual events, and digital guides.