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Issues for Boards and Issues for Funds 2022

Turning points

Issues for Boards and Issues for Funds 2022

Spring 2022

The war in Ukraine and its far-reaching economic consequences will leave very few companies untouched. As energy and commodity prices surge and supplies are cut off, there are questions about what this means for the ESG megatrend and net zero targets, with the ambitions of the Paris Agreement already looking hard to meet.

Despite this, the themes that boards can expect to focus on over the coming year will be ones that have been evolving for some time and will continue in importance. But they will be seen through a different lens, and often in sharper focus, because of current events that have brought about what Olaf Scholz, the German Chancellor, called a “Zeitenwende” (a huge turning point) in European affairs.

In this 2022 edition of Issues for Boards, we look at how boards should approach difficult decisions in a period of multiple world crises and how to ensure effective governance on issues such as climate strategy, cyber defence and AI, workforce activism and inclusion. These are critical issues for most companies, large and small, and require action.

We hope that you will find our commentaries and suggested practical action points helpful to your strategic thinking and to meeting the challenges of 2022 and beyond.

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Steering in the right direction: directors and their duties

Companies are increasingly exposed to litigation or public criticism as a result of their strategy or operational decisions. Recent headlines feature litigation about climate action plans, media campaigns about companies’ operations in Russia, and public outcry about the way a company has implemented employee redundancies. As with all big or difficult decisions boards need to make, a return to first principles will help guide directors to the right outcome.

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Walking the talk: ensuring effective governance of climate action planning

The imperative to reduce carbon emissions has not gone away, even with current global turbulence. All companies still need to plan how they will transition to a lower carbon economy, and many - whether because of pressure from investors or because it is likely to become a regulatory obligation - will need to publish those plans.

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Cyber-attack: building your defences

Cyber-security has been a regular item on board agendas for many years, but the war in Ukraine has triggered new warnings from governments around the world of potential systemic cyber-attacks. Businesses’ potential vulnerability to attack has continued to grow as they have accelerated their digitisation programmes, moved vast amounts of data to the cloud and facilitated employees working on home networks. Nation-state hackers increased their attacks in 2021 – far eclipsing the damage inflicted in 2020.

This means that a cyber-attack is almost inevitable – yet many companies are not prepared.

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Workplace activism: a change in mindset and why you should embrace it

Workplace activism has historically been viewed as a business risk. Instead such activism could be a signpost of a healthy corporate culture. How boards and business leaders approach and respond to workplace activism is integral to risk management, employee attraction and retention and long-term sustainability.

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Diversity and Inclusion: kick-off time for the second half

As the diversity landscape has evolved, so too has the expectation on boards to turn diversity talk into diversity action. To achieve sustainable change, business leaders must focus on the second half of the equation: inclusion.

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Artificial Intelligence: managing the novel risks and challenges

The benefits of AI are potentially huge: cost reduction through automation and process optimisation, and revenue generation, for example through customer targeting and opportunity identification. However, AI also brings, and amplifies, risks, notably in areas of data governance, procurement and third-party risk, operational risk and regulatory divergence. These risks need to be addressed holistically, with responsibility starting at the top.

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M&A activity: greater regulatory hurdles than ever before

Boards of businesses wishing to buy or sell assets face ever more regulatory hurdles including increased sanctions measures, new national security legislation and more active competition regulators. The rules are wide-ranging – and often widely drafted. Early and careful planning is essential if companies are to minimise execution risks.

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