The report highlights four steps directors can take to ensure that their governance approach meets these challenges.
- Enhance horizon scanning and risk management
Our report reveals that only a minority of board members fully understand how sustainability (35 percent), GenAI (12 percent) and trade and geopolitics (22 percent) can affect a company’s value, and an even smaller proportion (12, 8 and 10 percent respectively) actively scan the horizon for weak signals that indicate opportunities or threats on these issues.
To scan the horizon effectively, boards can adopt scenario-planning processes. Exploring a variety of possible scenarios can serve as a springboard to assess potential impacts and risks, identify opportunities and tailor strategies to emerging business environments. Through this exercise, companies can identify the capabilities required to thrive in a particular situation and the specific actions they would take should a certain scenario materialise.
But for this to happen, boards may need to adjust their competency matrices to be more nuanced and linked to forward-looking considerations.
- Take a long-term perspective grounded in purpose
“The board’s role is to define the North Star – whether you call it the purpose or vision,” explained a director at a European roundtable.
Directors in our discussions stressed the importance of the board’s role in defining and safeguarding the company’s purpose. “In practice, they need to provide a framework for evaluating and making complex choices and decisions, while empowering management to determine the best path to achieve that purpose,” said the director.
The survey shows that companies are struggling to develop strategies for translating disruption in sustainability, GenAI and geopolitics into a competitive advantage. This is most pronounced for GenAI, where only 37 percent of respondents strongly or somewhat agree that their company has plans to turn it into a competitive advantage. Worse, 18 percent do not know what steps the business is taking to adapt.
Over the years, the need to carve out meaningful time for strategic reflection has been a consistent theme. Yet, 38 percent of respondents said that they are not spending more time on external shocks and disruptions due to other important issues crowding out such discussions.
- Lead across divides
Amid growing polarisation, directors must actively engage across societal, cultural and geopolitical boundaries to bridge the divides that separate groups. This means promoting meaningful engagement with stakeholders – not just shareholders and customers, but also activists, competitors and government officials.
By embracing a collaborative mindset and encouraging management to do the same, boards pave the way for more informed and value-driven decisions while strengthening alignment and conviction in their company. More importantly, boards that take this approach can position their organisation as a responsible, forward-thinking leader in the marketplace.
- Drive impact beyond business boundaries
Boards should empower management to leverage stakeholder dialogues, so that the company will be better positioned to navigate the complexities of external pressures and to positively influence the broader landscape in which they operate. Engagement can put the company in the position to shape industry standards, regulatory frameworks and societal expectations, which can bring about considerable competitive advantage.
Of morals and value(s)
These complex times in fact give boards more opportunities to add value. Boards are often forced to choose from multiple potential courses of action, grounded in broader considerations such as achieving long-term goals and maintaining company values.
The good news that emerged from the report is that directors have made meaningful advances to address sustainability topics. It was also encouraging to see that lessons boards learnt by addressing sustainability issues are helping them evolve towards a new model of governance to help them better tackle other disruptions.
For instance, with the mandatory sustainability reporting requirements rolled out by the European Union, directors must now sign a statement of responsibility affirming that the company has appropriately integrated sustainability impacts, risks and opportunities into its financial disclosures, forecasts and forward-looking statements.
While these regulations can seem like a compliance burden, boards should embrace them with a forward-looking approach to drive long-term organisational value – not only in sustainability but also in navigating the impacts of GenAI, trade dynamics, geopolitical shifts and other emerging challenges.
So the journey continues. What’s more important is that as the issues grow more complex, sound business judgment and personal character become just as critical as deep business expertise. After all, the right answer often varies depending on stakeholder perspectives. By adopting a more forward-looking approach, boards can capitalise on these disruptions to enhance the company’s strategic direction and long-term value.
“INSEAD, a contraction of “Institut Européen d’Administration des Affaires” is a non-profit graduate-only business school that maintains campuses in Europe, Asia, the Middle East, and North America.”
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