Recap - AICD Essential Director Update 2022

AICD’s Essential Director Update in Melbourne today looked at the current and emerging issues impacting directors and what director should be asking and doing to fulfil their duties, optimise performance and mitigate risk.

Nicole Donegan GAICD, WOB’s COO attended today's session, with presentations from Ann Sherry AO FAICD, Chairperson, UNICEF Australia and David Thodey AO FAICD, Chair, Tyro and Xero.

Ann and David gave their take on the top 5 issues that directors need to be aware of and what they see as the key themes for 2023.   Here’s Nicole’s interpretations of their presentations.

Ann Sherry’s top 5

1. Understand your stakeholders

While organisation’s undertake research and seek feedback from their stakeholders, they usually look at aggregated data, which can provide disparate results. Organisation carry a lot of risks if they don’t consider:
  • ALL stakeholder needs and views
  • what the outliers are thinking  
  • short, medium and long-term views

What directors be should be asking:

  • Are we confident they we are acting in the organisation's best interests?
  • ​What should we be doing to engage with stakeholders to hear their unvarnished views? (aggregated views are not always what we need).
  • Are we clear who all of our stakeholders are?
  • Who aren’t we hearing from that we should be?

2. Sexual Harassment

Legislative change is coming as the Government takes steps to eliminate sexual harassment (more HERE), so it’s more important than ever before that this is a key priority for boards (it’s being suggested that liability will extend to Directors, as per OHS).

Health and safety management is the gold reference point for the way that we should be managing sexual harassment, with zero tolerance and a speak up approach.

What directors should be asking:

  • How are we monitoring and measuring sexual harassment?
  • What data are we seeing on this? 
  • If we’re not seeing data, is it because it’s not being recorded or because our culture doesn’t encourage reporting?
  • How do we link harassment to safety practices?
  • Are our policies up to date?
  • Is our culture proactive or reactive?

3. NFP Governance

The NFP is a growing and challenged sector -  50% of NFP’s surveyed by the AICD said they were worse off post Covid. The foundation of a successful NFP is having a clear purpose.  While NFPs are well intended, they face similar risks to commercial organisations.  And with cyber security they are often more vulnerable because they don’t have capital to invest and they hold a lot of personal information.  While NFP directors are well intended and often voluntary, they still need appropriate director skills.

What NFP directors be should be asking:

  • Does management understand the organization’s purpose?
  • Do we have clear financial management and accountability?
  • Does our Board really have the skills to manage regulatory risks? (critical self assessment)
  • Do we really have the capability to meet our purpose or are we doing it this for our individual purposes?

4. Develop skills for the workforce of the future

There's a global skill shortage, but we see organisations using the same old solutions and stuck in convenience hiring. We need to rethink our workforce planning because we are not fit for purpose; think differently and put more effort into training a retraining.  As directors we should be managing skill shifts in our organization and industry, planning for it and providing solutions.

What directors be should be asking:

  • How are we accommodating people with disabilities?
  • What are we doing about older workers? (rethink rehiring older experienced people)
  • How can we do things differently?
  • Are we happy to accept our current staff churn?
  • What are we doing about retraining?

5.  Reconciliation

Most organizations have a Reconciliation Action Plans. If yours does, have you seen it or is it just a tick box? Most organizations have made little inroad into the cultural change needed to open their thinking and what it means to the Australia of the future.  The new government is committed to Constitutional review and this will impacts business.

What directors should be asking:

  • Has the board discussed this issue?
  • Do we have a view as a board?
  • Are we on the right side of history and part of the development of the Australia of the future.

David Thodey’s AO Top 5

1. Culture

Directors are responsible for the culture in the organization. But how do you really understand if the standards set in the boardroom are being followed by the organisation?  David suggests that directors need to spend time in the organization and that the days of just turning up to meetings are over. While there’s a fine balance between spending time in the organisation and not interfering with management, there are things you can do.

What directors can do:

  • Visit the organisation, talk to staff and engage.
  • Look at social media, what’s being said by customers.
  • Talk to customers.
  • Determine if the behaviours you see are consistent with the organisation’s values and purpose.

2. Climate change governance

With a global target to reduce emissions by 50% by 2030, a recent AICD survey had climate change as the highest rated issue for directors. New reporting requirements and standards are set to be published at the end of 2023.

What boards can do:
Boards need to get ahead of this and understand the science behind their emissions.

3. Cyber security

It’s expected that no organisation will be spared from some form of cyber-attack. Boards need to understand the risks and how their organisation will respond. Papers written on this subject are a good guide, but organisations need a cyber strategy and to practices cyber attack simulations so they are prepared. How would your organisation react if you had a cyber-attack?  Do you know?  Simulations often reveal that organisations don’t have the latest software versions and that processes are not up to date.

What boards should be asking and doing?

  • What data do we hold?
  • Why do we hold it?
  • If we hold that data, is it encrypted?
  • Have we set clear roles and responsibilities?
  • Do we have a cyber strategy?
  • Is a cyber-attack on our risk register
  • Have we planned for a cyber event and undertaken simulations?

 4. Innovation and driving technology transformation.

Technology is an enabler of innovation and drives value for all stakeholders. Boards often say they need a technology team or digital expert on the board. This is a dangerous position. Every director should have a working knowledge of technology. You cannot abrogate responsibility for this.  Directors need to be engaged.

What directors can do?

  • Directors need to be engaged in technology.
  • Establish a technology sub committee or working group, where the technology impact on the organization is discussed and experts brought it.
  • Make technology core to the board.

5. New ways of working

Technology shows we can work flexibly while a contrary set of discussions talks about creating a culture. We need to recognize that there’s an element of flexible working in every job, but some jobs just can’t be done remotely. We also need to understand the cultural impact of working flexibly. 

What boards can do?

  • Understand how your organisation is managing flexible working.
  • Don’t simplify this issue down to being working in the office or from home.
  • Determine the right mix for your organization to manage associated risks.
  • Ask how can we and do this differently going forward?
The information in this article is an interpretation of what was heard at the Essential Director Update 2022.
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