Critical business threats such as climate change, AI and cybersecurity are being pushed to the backburner as British boardrooms focus on immediate business risks, according to a new report*.

Amid continued economic volatility and challenging trading conditions, research among 200 Board Directors reveals a surprising lack of focus on future-proofing risks. Only 8% consider cybersecurity one of the top three risks facing their organisations, while other critical issues like AI (4%) and the environment (2%) lag further behind in board risk and opportunity assessments.

In contrast, boards view the economic environment as the biggest risk facing their organisations (19%), followed by workforce talent (16%), access to finance (12%), regulatory change and compliance (12%), and geopolitical factors and UK Government policy (10%).

A lack of priority afforded to future-proofing activities may stem from gaps in NED expertise. Paradoxically, while the risk of cybersecurity and ESG appear undervalued on the board’s agenda, both are also two of the most frequently cited topics on their board education plans over the coming year (both 11%), followed by AI (7%). Governance, legal, and compliance training was the most frequently cited training request (14%), underscoring the growing regulatory burden on NEDs.

The research findings form the basis of a new report by Norman Broadbent in partnership with BDO – Navigating a New Era for the Non-Executive Director – launched today at an event in London for Board Directors, featuring a keynote speech from media and sports business veteran and current Chair of the Welsh Professional Rugby Board, Malcolm Wall.

Evolution of the modern NED

The heightened regulatory demands placed on NEDs are just one example of how this role has transformed from a primarily advisory position into a more complex and time-consuming profession.

Despite the NED once being highly valued for their networks, only 3% of directors viewed connections as important value-adds for a NED. Instead, a quarter of the respondents (26%) thought the greatest value-add a NED can provide today is an independent perspective followed by strategic thinking (cited by 22%).

These findings correlate with the top behavioural and technical competencies sought by boards looking for fresh NED talent. Boards value a strategic mindset above all other behavioural competencies (cited by 27%) with industry knowledge being the most prized technical attribute (also 27%).

While the role of the NED has changed, with increased regulatory oversight and personal liability, the research suggests that recognition and remuneration have failed to keep pace. More than half (53%) say remuneration is not keeping pace with the demands of the role, with small company and listed company NEDs in particular feeling that the risk/reward ratio is out of kilter, highlighting the risk-reward imbalance for those facing the highest levels of accountability.

UK boards struggling to recruit the right NEDs

Boards have recognised the NED value-add potential but nearly all (96% are struggling to attract those with the right skills or experience. Nearly a quarter (23%) are finding it difficult to attract the right competencies, relevant experience or industry knowledge. Overall, nearly a third of respondents (29%) said there was a challenge in finding the right talent due to the risk/reward ratio, the time commitment involved or the level of compensation more generally. Smaller boards struggle to attract NEDs due to the low remuneration on offer whereas NEDs are put off joining regulated boards due to the levels of personal risk involved, despite the much higher monetary reward on offer.

Tanya Gass, a Partner in Norman Broadbent’s Board Practice said: “The role of the Non-Executive Director has changed beyond recognition in recent years. Where once the NED’s remit was largely confined to corporate governance and network sharing, that remit has since expanded to cover strategic decision-making, and far more regulation and compliance, not to mention stakeholder engagement. Perhaps it’s not surprising that many business risks, such as cyber, AI, and climate change, are not being prioritised by boardrooms in the near term as they continue to grapple with a volatile global economic environment. The expanded burden of responsibility is clearly beginning to weigh heavily on the shoulders of NEDs as many feel that they are not adequately remunerated or recognised for their work. Perhaps it’s time to recalibrate the roles and rewards of NEDs, based on their true value.”

“There was a time when strategy was purely an executive board member consideration” said Director Shrenik Parekh at BDO. “This is no longer the case, with more and more being expected of non-executive board members, particularly the longer-term success of the businesses they represent. Beyond providing strategic direction and input, it is clear that NEDs are increasingly spending more time managing and interacting with stakeholders such as shareholders,  regulators and external consultants. Furthermore, the role of the NED today unsurprisingly goes beyond participating in Board meetings – ‘walking the floors’ and setting a clear and coherent ‘tone-from-the-top’ is very much part of the job description. As such, self-assessment and reflection from directors is critically important – as is evaluating collective board performance.”

*Report from Norman Broadbent in partnership with BDO. – Navigating a New Era for the Non-Executive Director –  download.

www.bdo.co.uk