Directors See ‘No End in Sight’ To Current Cybersecurity And Talent Challenges

More directors say the war in Ukraine has affected their companies’ cybersecurity than anything else and three quarters of directors see it as a prolonged challenge, “with no end in sight.”
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Over a month after the invasion of Ukraine, directors are growing increasingly concerned about the long-term effects of a war in Europe. Inflation, cybersecurity and supply chains were already issues before the war, but now, directors are concerned about how bad it may get—and for how long—before it gets better. More than 70 percent say they see “no end in sight” to the current talent and cybersecurity issues.

In a poll of 143 public company board members, surveyed March 21-25 as part of our Director Confidence Index, 56 percent said Russia’s invasion of Ukraine has heightened cybersecurity concerns—and 39 percent also expect significant consequences on their supply chains.

These challenges are reflected in the Director Confidence Index, where directors are asked to rate their outlook on the business environment 12 months out and their confidence in the current conditions. Directors’ rating fell to an all-time low this month.

The war has especially affected supply chains in sectors like materials and consumer staples, where 100 percent of directors report an impact. 

Not only has the war intensified existing challenges, but directors also anticipate many of those issues are here to stay. Fully three-quarters of directors whose cybersecurity concerns have increased since the invasion of Ukraine say they see “no end in sight” to the issue, compared to only 12 percent who expect it to be resolved within 1-2 years. No directors forecast cybersecurity risks to diminish in the near term (<6 months).

Seventy-one percent also expect talent shortages to remain a problem for the foreseeable future, and 50 percent anticipate supply chain disruptions to continue for another year or two.

The board chair of a large entertainment and hospitality company said, “We face significant challenges. This is cyclical, and we will prevail, but it will take smart, dedicated public policy, along with continuing private investments and smart management by enterprise, supported by dedicated, courageous board oversight at all levels of public, private and operating not-for-profit companies.”

When it comes to the war specifically, 45 percent of directors say companies should at least pause their operations in Russia, vs. 39 percent who say companies should pull out of Russia entirely. Only 1 percent of directors said companies should be able to continue operations in Russia without facing backlash or pressure.

“Whatever companies chose to do in this situation will be a precedent for China’s invasion of Taiwan. Will these same companies and industries speak out against China and remove their operations, distribution, etc. in China? Let’s not kid ourselves, China is more totalitarian than Russia,” said the board chair of an international law firm.

Of course, the decision is often industry specific. Directors in sectors like healthcare and pharma say they can’t pull out for humanitarian reasons. 14 percent of them say companies should follow the letter of the law, compared to only 7 percent overall.

For those in industrials, 19 percent agree with the sentiment that companies should follow the letter of the law. The plurality, however, believes that companies should pull out of Russia entirely, at 48 percent. Directors in the consumer discretionary sector are split with 41 percent believing that companies should pull out entirely, and an equal percentage suggesting a pause in operations.

Fed Policy

The Fed’s quarter-point interest rate hike didn’t disappoint many directors. In fact, the vast majority, 63 percent, say they fully support the decision—and 28 percent argue the rate should have been greater.

Only 9 percent say the move came a tad too early, such as the director of an investment firm, who says, “Raising interest rates is inflationary and therefore counterintuitive. If you want to control inflation, reduce advantages of new capital investment. Investment tax debit as opposed to investment tax credit. Focus on inflation causing activity. Don’t destroy the entire economy by raising it for everyone, as this is in and of itself Inflationary.”

About the Director Confidence Index

The Director Confidence Index is a monthly survey of public company board members on the state of the overall economy, the outlook for business and other topical issues impacting public companies. Conducted in collaboration between Corporate Board Member and Diligent Institute, the Index benchmarks confidence among the governance community and is a forward-looking indicator of market movements and corporate strategies.

About Corporate Board Member

Corporate Board Member, a division of Chief Executive Group, has been the market leader in board education for 20 years. The quarterly publication provides public company board members, CEOs, general counsel and corporate secretaries decision-making tools to address the wide range of corporate governance, risk oversight and shareholder engagement issues facing their boards. Corporate Board Member further extends its thought leadership through online resources, webinars, timely research, conferences and peer-driven roundtables. The company maintains the most comprehensive database of directors and officers of publicly traded companies listed with NYSE, NYSE Amex and Nasdaq.

About the Diligent Institute

Diligent Institute is the corporate governance research arm and think tank of Diligent Corporation. The Institute produces publicly available cutting-edge research on corporate governance practices by directors, for directors, with a global perspective. Learn more at diligentinstitute.com.


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