Seven years on from the global financial crisis and the pressure on boards and directors to raise their game and perform more effectively is intense. The aftermath of the 2007-08 crash, and a spate of highly publicised corporate scandals relating to poor risk management and fraud has seen the scrutiny placed upon company boards intensify. As a consequence, today’s board now confronts significant oversight accountability and personal liability that has become part and parcel of an increasingly complex compliance landscape.
What’s more, strengthening shareholder activism means boards now need to evaluate deals and decisions with greater diligence than a decade ago. Investors and regulators have become less forgiving and are quick to challenge any board decision that impacts shareholder value. As the definition of board effectiveness changes, companies are turning to digitalisation in bid to become more successful and respond to today’s fast-paced, global business environment.
A confluence of digital drivers
Board processes typically involve significant quantities of paperwork meaning that traditional document production is very resource intensive in its creation. Board books need to be manually compiled, printed and distributed in a timely manner, with all pre-publication edits being managed in a seamless fashion.
These paper-based processes are proving increasingly inefficient, expensive and cumbersome for today’s boards, who are themselves becoming more complex in terms of the number and location of members. International organisations need to ensure the integrity of document delivery. Today’s FTSE 100 and 250 companies, for example, spend on average £40k a year developing and distributing board books, burning a further £3.5k in additional administration preparation costs for every board meeting.
From a compliance standpoint, dossiers must be distributed in line with regulatory timeframes to ensure members are able to prepare appropriately and in good time for meetings. It’s a challenge not just confined to global organisations. An increasingly volatile business landscape means many boards now meet with increased frequency, fuelling the need for fast, effective information flows.
Today’s board members and executives also need to be able to collaborate and participate in accelerated decision-making and be prepared for the unexpected. That means enabling geographically dispersed board members to participate in votes and resolutions, or respond in real-time to issues as they evolve. High-performing boards also look to operate a transparent and rolling board agenda that ensures everyone stays fully informed of events and developments.
These points explain why digitalisation is proving to be a game changer for many companies. This is especially true when it comes to preparation and communication among board members and executive committee personnel.
The digital board – what’s different?
The advantages of going digital are significant, especially for the fast and efficient provision of documentation that directors need to make fully informed decisions. Board books can be compiled and distributed quickly and with ease and for a fraction of the cost of paper based methods. Indeed, today’s cloud-based digital solutions can generate an ROI on the production and distribution of board packs in just four months. Board members are able to instantly access agendas, resolutions and reports, 24 hours a day, no matter where in the world they might be.
Digitalisation also delivers powerful new collaboration and communication capabilities. Board members can electronically annotate documents and share comments instantly with other board members. Changes and modifications are automatically captured, time and date stamped, version controlled and tracked. What’s more, today’s digital solutions include digital voting capabilities, so directors can participate in meetings even when they are physically not present.
As well as streamlining the information exchange process, the digital board is well equipped to demonstrate process compliance with local regulatory requirements. The ability to provide an electronic audit trail is crucial for organisations that operate in multiple countries. The digital board can now respond more effectively if regulators or investors challenge their decisions or processes.
Benefiting a range of stakeholders
In addition to the board benefits, digitalisation delivers significant advantages for the company secretary. Board assistants will spend less time preparing board packs, instead using automated workflow functions to create, distribute and update documents in familiar environments such as Microsoft Office or SharePoint.
Secretaries can implement last-minute changes instantly and more easily manage document versioning and distribution. Digitalisation also provides electronic audit trails for non-board members, which makes it possible to achieve full visibility of how materials are used and by whom. A capability that’s essential for the secretariat when it comes to demonstrating the delivery of board papers within appropriate timeframes, and in full compliance with local country policies and regulations.
Securing boardroom communications
Data breaches pose a substantial risk to directors, executives and corporations. As a recent survey of ICSA members reveals that a staggering 70% of board members still print and carry around board documents. Organisations with 251-500 employees, proved the most reliant on hard copies, with 80% of this group admitting they still used physical documentation.
When it came to the secure disposal of confidential board documents, 40% of those questioned could not confirm if this was done in line with compliance policies, and 16% admitted that they only ‘sometimes’ destroyed documents in line with compliance policies.
The digital boardroom is able to eradicate the risk involved in the production and distribution of board packs using insecure delivery methods. Confidential documentation can be shared using a centralised secure vault that’s protected by strict access controls. This ensures the board’s activities stay confidential at all times – and that documentation no longer needs to be printed out and carried around by board personnel in preparation for meetings.
This approach has delivered a secure and cost-saving way for Germany-based BBBank to make confidential board documents available, in compliance with regulations. Its board members now access confidential meeting dossiers and reports from secure dataroom, using a password and a one-time PIN that’s texted to their mobile device.
Navigating user challenges
The introduction of digitalisation involves the use of tablets and browser-based solutions that may be a challenge for those who are not digital natives. For this reason, digital solutions need to be intuitive to use and a carefully planned introduction programme needs to be put into place to ensure everyone can get up and running smoothly.
This approach has paid dividends for Insurance company Helvetia, which provided iPads for board members to help the transition from paper based processes to fully digital documentation. Additional support services were put in place to respond to help requests, which meant that user uptake and acceptance was fast. Today, around 40 people in multiple locations are using the system, which is fully compliant with the privacy policies of a number of different territories. The board use the solution to securely access and work with documentation and participate in digital voting.
Moving security and efficiency into the boardroom
Digitalisation enables boardrooms to maximise cost and time efficiencies. From eliminating the expense and time involved in the production and distribution of board papers, to enabling new and better ways to communicate and collaborate. Executives benefit from greater transparency and faster, improved decision-making.
Corporations are also able to generate significant process efficiencies in relation to board management. By utilising automated workflow functions they save time, money, and enable the faster flow of information and approvals between the board and executive committees.
For compliance and risk management, making the move to digitalisation addresses a multitude of security and compliance concerns. Documents can be protected from unauthorised access, and all interactions – including reviews, notes and annotations – are tracked and archived. A facility that’s proving of increasing value for organisations that need to undergo formal third-party board assessments or performance oversight procedures.
In an era of shareholder activism, today’s organisations need to demonstrate their ability to drive well-evaluated decisions quickly and securely. The digitalisation of board processes can go a long way to enabling boards to perform more effectively and with greater security than ever before.
By Mark Edge, UK Country Manager at Brainloop