Orginal content provided by BDO USA
Boards Are Striving to Keep Pace with Digital Transformation and Cybersecurity Imperatives
Technology is fundamentally changing the way we do business, introducing new opportunities and new threats. Succeeding in today’s digital economy requires operating as a digital business. To be on the right side of disruption, digital transformation is essential to survival. The forces behind widespread digitization have put even the most conservative businesses on notice.
Digitization is a key way for organizations to increase profitability, enhance recruitment and employee engagement, encourage retention, and accelerate growth. True digital transformation, however, is a much bigger endeavor and fundamentally can serve as a catalyst for business transformation with proper board oversight. Along with digitalization, comes the increasing need for information governance with a keen focus by directors on mitigating cyber risk and enhancing data privacy protections.
“BDO's 2018 Cyber Governance Survey reveals how public company board directors increasingly recognize the competitive advantages of embracing a digital transformation strategy and mitigating vulnerabilities related to cyber risk. Developing a strategic path for an organization's digital transformation and devoting company resources and board oversight to cybersecurity and data privacy are now necessities for businesses to survive and thrive during this time of intense change.”
BDO USA’s National Assurance Partner - Communications and Governance
he 2018 BDO Cyber Governance Survey, conducted annually by the BDO Center for Corporate Governance and Financial Reporting, measures the opinion of public company directors on these issues, as well as other key governance concerns. This year’s survey, conducted in July and August 2018, examines the opinions of 145 corporate directors of public company boards.
Digital Transformation and Disruption Driving New Value
In the world of business, the goals to “disrupt, innovate, and transform” have become daily pursuits of organizations, elevating the role of technology to the top of the board agenda.
Nearly two-thirds (66 percent) of public company board directors say their organization either has a digital transformation strategy in place or is planning to develop one, suggesting that digital transformation initiatives have transcended beyond the sole domain of IT to involve the entire organization. However, while they may be making ad-hoc investments in digital, many businesses have not yet set a digital transformation strategy into motion. About one-third of respondents (34 percent) say their organization has no digital transformation strategy currently and does not intend to develop one in the near future.
"Digital transformation is predicated on foresight: the ability to re-imagine business five years into the future—and then work backwards. Management naturally tends to focus on the short-term, so the board of directors plays a critical role in catalyzing strategic planning for the long-term view. And as the pace of change accelerates, the timeline of ‘long-term’ is shrinking. Organizations that live solely in the present are already operating in the past.”
BDO USA’s National Digital Transformation Services Leader
With or without a concrete strategy in place, boards are taking steps to address technology disruption. Nearly half (45 percent) have increased capital allocation toward digital initiatives; almost three-in-ten (29 percent) have hired board members with relevant oversight skills; and more than a quarter (27 percent) say the board has overseen the development of a digital transformation roadmap. Another 16 percent of board directors have introduced new metrics for enhanced business insight. Meanwhile, nearly one-third (29 percent) of respondents report they have not done any of these to address technology disruption, which may point to organizations overlooking significant opportunities and underestimating critical risks to their business.
The most important digital priority for directors serving on public company boards is investing in innovative digital capabilities for anticipated business needs, cited by 31 percent of survey respondents. This is followed by optimizing operational efficiencies (25 percent) and improving customer experience (21 percent). Only 10 percent of respondents are focused on implementing a change management program—a gap that may stymie business adoption and user enablement.
BDO'S CLOSER LOOK:
Digital transformation can be boiled down to three foundational areas of future value creation: Digital Business, Digital Process, and Digital Backbone.
Digital Business is focused on creating new value, market differentiation, and revenue in the digital economy. Digital Process focuses on operational digital re-invention by optimizing end-to-end process performance and improving efficiency. Digital Backbone is the foundation on which all digital initiatives are built, centering on addressing or removing the IT complexities, risks, and barriers to innovation, to meet business and evolving market demands. These fundamental value drivers are interconnected—and will become even more intertwined as your organization becomes increasingly digital. BDO regularly produces resources to keep those charged with governance informed about the latest developments that may impact their business, including this article on how middle market organizations are re-imagining business and operations for the future digital economy: Digital Transformation: The Middle Market Goes “Back to the Future”
Full Version is available on BDO USA's website