On the 2022 board agenda
As we enter the third calendar year of the pandemic, it continues to dominate many business agendas. Alongside efforts to restore some level of normalcy in the face of multi-faceted challenges such as supply chain issues, workforce challenges, increased regulatory requirements, stakeholder activism, and move to remote/digital operations, the New Year offers the chance for companies to strategically reposition for the future.
The pandemic has presented a true test of leadership for many directors and their management teams as many have had to commit more time, collaborate, and adapt to ensure business survival and resilience. While we hope for a better year ahead as we learn to live with COVID-19, we can expect 2022 to be packed with its own priorities. In this article, we outline five top considerations for boards to keep front and center as they plan and execute their 2022 agendas.
Effective boards allocate more meeting time to strategic, forward-looking issues compared to historical reviews and operational matters
Projected double-digit inflation, access to foreign exchange, 2023 elections, and security are some of the key concerns that will continue to shape the outlook of the Nigerian business landscape.
Boards should ensure that corporate strategies remain agile i.e. are scenario-based, regularly monitored, and updated to reflect the changing landscape. This requires collaboration with management, a willingness to challenge assumptions, access to information to facilitate effective decision-making, and the use of expert insight and advice, where required.
We find that effective boards allocate more meeting time to strategic, forward-looking issues compared to historical reviews and operational matters; they also have structured strategic planning processes that involve the board at defined stages.
This is no longer a ‘nice-to-have’ but rather a necessity as stakeholders and socially responsible investors expect companies to be transparent about their environmental impact, workforce diversity, and executive compensation amongst others. Over the last 12 months, the Nigerian Exchange Group (NGX) and Securities and Exchange Commission (SEC) have issued the Sustainability Disclosure Guidelines (SDG) and the Guidelines on Sustainable Financial Principles for the Nigerian Capital Market respectively. In addition, the Nigerian Code of Corporate Governance 2018 (NCCG), which applies to all companies, requires that boards should monitor the implementation of sustainability policies and report on compliance.
The factors that constitute Environmental, Sustainability, and Governance (ESG) measures remain wide and compliance has been, until recently, voluntary. However, there is a gradual strengthening of ESG standards and boards should begin to prepare for mandatory compliance. With the establishment of the International Sustainability Standards Board announced at the 2021 UN Climate Change Conference (COP26) last November, it is expected that sustainability reporting will be elevated to the same status as financial reporting.
Also, boards must be proactive in identifying and managing the potential legal, reputational, and operational risks associated with ESG such as health and safety, ethical sourcing, and human rights in their business value chain.
With increased access to emerging technologies, boards need to rethink how their businesses engage with customers and the quality of experience delivery. It is a more competitive world to attract (and retain) the attention of customers–about half of Nigerian customers choose their providers on the basis of experience delivery (KPMG). Customers are also particular about the brands they identify with and increasingly will not hesitate to share the quality of their experiences on social media with sometimes far-reaching effects on corporate brands.
Organisational practices and policies should align with relevant consumer protection principles to minimise breaches and undue legal exposure. The impact of changing customer behaviour, in the face of economic constraints, on a product, distribution, and wider organisational strategy should also be a continuous conversation for boards and executives.
Human capital management
Attracting and retaining talent has never been more challenging as the pandemic is forcing a shift in life priorities and goals amidst increased (remote) working hours and desire for career fulfilment which is playing out in what is now termed the ‘Great Resignation’.
A 2021 employee satisfaction survey by Jobberman Nigeria indicated potential attrition as high as 70% among employee groups. Career growth and competitive compensation remain important themes as skilled talent widen their net across the globe in search of opportunities. Organisations need to have a compelling employer value proposition suited for today’s multigenerational workforce.
It is important that in providing oversight of the company’s organisational agenda, boards prioritise human capital management. Succession planning for key roles beyond the CEO should also be a key agenda item to ensure business sustainability and resilience. Particularly for senior roles, boards should ensure that employment contracts sufficiently reflect their fiduciary duties and clearly articulate the employer and employee obligations in instances of disengagement.
COVID-19: Maintaining resilience and agility
The pandemic, and its associated uncertainties, will remain a top-of-mind issue for businesses and individuals for some time to come. It is imperative that businesses now embed many of the good practices and disciplines built during the reactionary phase of the pandemic to ensure continued resilience e.g. effective cashflow management, heightened cyber security practices, remote working, agile supply chain planning, and proactive review of contracts/agreements.
The year 2022 is pivotal on many fronts for corporate entities with global and local factors presenting both threats and opportunities. It is important that boards work closely with the management of their organisations to ensure that there are clear strategies in place to address corporate action-driven towards increasing value for all stakeholders.
Wonuola is a senior associate in the Enterprise Practice of the law firm, Olaniwun Ajayi LP. She specializes in corporate governance, corporate establishment, and compliance.