Three ‘challenges’ keeping board members awake at night

KUALA LUMPUR: A survey co-launched by the Institute of Corporate Directors Malaysia (ICDM) has found that market and operating risks along with economic uncertainty in Asia are the top three challenges that keep directors of Malaysian companies awake at night.

The inaugural BOLD 3.0: Future-Fluent Board Leadership in Asia released on Dec 2 showed 21% of 120 Malaysian board leaders believed that market risk was the main factor, followed by operating risk (20%) and economic uncertainty in Asia (18%).

The concerns for Malaysian boards were also similar to five other regional peers, namely India, Singapore, the Philippines, Sri Lanka and Vietnam.

The BOLD 3.0: Future-Fluent Board Leadership is a research study produced by the Centre for Creative Leadership (CCL), in partnership with ICDM and other institutes of directors in Singapore, the Philippines, India, Vietnam and Sri Lanka.

It was launched in conjunction with the Dec 2 inauguration of ICDM headquarters at KL Eco City by its chairman, who is also former Securities Commission Malaysia chairman Tan Sri Zarinah Anwar.

According to the survey, the boards in Asia were mostly worried about hits that the organisation may take due to sudden changes in equity, currency, inflation and interest rates.

“They are also worried about the more-than-ever-before probability of loss due to changes in demand, costs, obsolescence and prices,” it said.

The survey also showed board leaders are worried about economic uncertainty, owing to a comparatively slower economic growth in Southeast Asia and China as well as the impact of a trade war and the general negative sentiment surrounding economic growth.

Apart from that, 9% of the respondents saw cybersecurity as among the major concerns, while 8% of them were concerned about global competition as well.

“Technology remained a key concern in most boards, especially issues relating to cybersecurity, which was deemed to be of most concern to financial institutions,” it added.

Meanwhile, the survey also showed that Malaysian boards spent too much time on short-term policies, plan and strategy instead of long-term ones.

It said the boards spent 6% of their time on short-term planning, when they should be spending just 3%.

“While for long-term planning, the survey showed the boards spent 12% of their time on that, when they should spend a longer time of 15% for that,” said the survey.

Commenting on that, ICDM president and CEO Michele Kythe Lim said many listed companies in the country were too focused on short-term issues such as the quarterly financial results.

She hoped the survey will make the companies more aware of the need to focus more on other matters such as technology disruption.

“A lot of the time, the disruption is coming in and you don’t see it, because you just focus on your short-term quarterly results, managing financials and risks, and you don’t see other things that are impacting the company such as technology disruption, or corruption within your company,” she said.

Hence, she hoped the survey would form a basis to evaluate the board members and align their capabilities to promote effective leadership.

Meanwhile, CCL managing director and vice-president for Asia Pacific Elisa Malis said the survey showed 8% of Malaysian boards do not have any evaluation process.

The finding was far better than some countries which found more than 40% of their boards do not have any type of the evaluation process, she added.

However, she said only 4% of the boards have individual evaluation by external consultants.

“This is where we want to see the improvement in the next step, as when it comes to (corporate) governance scandals, having external evaluation really helps the board look at itself more critically and uncover its blind spots,” she said. – Bernama

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