One afternoon last week, Protiviti President and CEO Joe Tarantino welcomed more than 130 clients and friends of the firm to spend an afternoon with the members of Protiviti’s Advisory Board: Peter Henry, Fran Townsend, Evelyn Dilsaver and Susan Molinari. The afternoon included a panel discussion with all the Advisory Board members followed by fireside chats with individual members of the board. It was a unique opportunity for Protiviti’s clients and friends to hear the perspectives from these distinguished individuals on a host of issues. And, for me, it was a privilege to be the moderator of the panel discussion. Armed with questions submitted by the attendees as well as some of my own, I sought the Advisory Board members’ views on topics ranging from dealing with the pandemic and its aftermath to the role of companies in enhancing cyber resiliency, advancing diversity and inclusion, and addressing climate concerns. The following summarizes some of the key takeaways from that afternoon.
Looking Back on an Unprecedented Year: What Did We Learn?
We all know this now: Governments were largely unprepared for a “100-year event” like the global pandemic we all experienced – a shocking revelation to many, considering that disaster planning and business continuity management have been disciplines for many years. It was also shocking because in the U.S., government officials had developed a pandemic playbook to coordinate and improve efforts to prevent, control and respond to an event like this one more than 15 years ago – a playbook with both national and international potential that had received intermittent attention and funding over the years since.
On the plus side, corporate leaders stepped forward in a very important way: Corporate CEOs were thrust into a position of moral authority in the perceived vacuum of political leadership regarding people’s wellbeing and need for direction. By doing so, they earned valuable trust equity that they would be wise to preserve and build on going forward.
Supply chain disruptions presented formidable challenges, and the delays and shortages caused by broken supply chains are still reverberating across the world – vaccine supply being a key example. Where supply lines proved resilient (as was the case for the food supply) it was mainly due to human effort – essential, and mostly low-paid, workers who continued to produce, ship and distribute products under dangerous conditions.
We also saw unexpected strengths: Work-from-home (WFH) arrangements, necessitated by lockdown orders and stood up over a very short time, presented technological challenges at scale. But these challenges were overcome quickly, demonstrating the latent ability of companies to raise their technological levels – when vital for survival. Transitioning to a fully remote environment was not easy for everyone, however, and countless families struggled with school-from-home arrangements, particularly those in lower- and moderate-income neighborhoods that did not have ready access to the needed technology.
In sum, while the pandemic revealed remarkable resilience and determination, it also exposed deep inequalities in our society and labor force that will need to be addressed, along with the question of what it means to be prepared.
What Are the Top Risks Facing Businesses Today?
When Protiviti and the NC State University ERM Initiative published the results of our 2021 Top Risks survey, which was conducted from mid-November through mid-December 2020, it likely didn’t surprise anyone that the health-related impact of COVID-19, along with the economic stress caused by the pandemic, held the top three spots. Rounding the top 5 risks were concerns related to adequate resourcing for the adoption of transformative digital technologies and concerns about the privacy of company and customer information.
Public health and the economy remain the main concerns in the short term, but the bigger and harder question for the long term is, what will a recovered world look like? In the U.S. and elsewhere, governments and corporate leaders need to decide how they feel about democracy, and what kind of technological and economic climate will best sustain prosperity, not just for those at the top, but for everyone.
For example, lower tier workers were disproportionately affected by job losses during the pandemic. In the U.S., more than 20 million jobs were lost, mostly in the 30-40% income tier, and unemployment shot up to 14.8% in April 2020. Only half of those jobs have been recovered so far – and not necessarily the ones that were lost. Female labor participation has dropped significantly during the pandemic due to childcare and home-schooling demands. One of the defining challenges of governments and corporate boards as they look to recovery in the months and years ahead is to ensure the recovery is equitable and considers workers in all sectors, especially the sectors on which we are critically dependent.
What Role Should Corporations Play in Enhancing Cyber Resilience?
WFH arrangements emboldened cybercriminals to take advantage of less secure networks, and cyber-attacks have been on the rise, including major attacks by state actors of which the SolarWinds attack is just the latest example. The Biden administration has prioritized national security and especially cybersecurity. It has dedicated significant resources and brought in highly experienced leaders to oversee these efforts, which are positive developments. The administration is committed to preventing state actors from interfering with elections and attacking the nation’s infrastructure, among other priorities.
But corporations cannot cede responsibility for cybersecurity to the government. Cybersecurity threats, and especially state actor threats, are so pervasive and sophisticated that no entity can “go it alone” – government-private sector partnerships are the best way to ensure defense by combining the advanced capabilities of corporations with advanced warning/intelligence by governments.
Will There Be Governmental Initiatives Aimed at Mitigating the Risks of Misinformation Campaigns?
Societal polarization increased in the past year, and misinformation, promulgated through social media, has widened the divide. Recently, 12 U.S. attorneys general sent a letter to social media giants Facebook and Twitter, expressing concerns about users being exposed to misinformation about vaccines – citing 59.8 million users as being potentially exposed.
Misinformation also threatens security and political stability. In the U.S., the Congress has made it clear that Big Tech needs to step up and do more to address the problem of misinformation – or face legislative consequences.
What Is the Outlook for Climate Change?
Climate change is a central issue for leaders globally – and one of the biggest opportunities presented. Consider this: One billion people worldwide currently lack access to electricity and roads. Most of these people live in emerging economies, where the working age population is about to explode in the next two decades. The development potential of these regions and their people could be done in a green, sustainable way – or not.
In the U.S., President Biden has taken several steps to advance the administration’s climate change agenda, and the proposed $3 trillion infrastructure bill includes investments for green energy technology and jobs. The president is in a good position to elevate climate change as a priority to a broader audience, despite the many challenges to achieving meaningful progress.
The opportunity for public-private cooperation on climate change is very real, with many business sectors already focused on the role they can play. The financial services industry and its regulators, for example, are currently shaping policies to advance climate change mitigations through “green” lending and investment strategies.
What Is the Role of the Corporation and How Does It Relate to ESG?
Broadly speaking, ESG (environmental, social, governance responsibility) is about rethinking the purpose of the corporation and how it meets the needs of all of its stakeholders. Corporations were originally formed to raise capital to benefit the community, shareholders, employees and the larger organization. But in 1970, the Friedman Doctrine shifted the focus squarely on the shareholders. By embracing ESG, corporations are going “back to the future” – coming back to where they started and taking a look at how they serve all constituents, including their communities and their employees.
Board members need to ensure that their companies are focused on all three facets of ESG: the environment, social criteria and governance, each of which includes many varied considerations. They need to challenge their organizations to develop ESG strategies, require that progress be routinely monitored, and hold them accountable for achieving ESG goals. With increased focus on ESG, including required disclosures, board members will be looking to their internal audit departments to review and confirm the accuracy of internal and external reporting.
How Important Is Culture to the Success of a Company?
Corporate culture is about values, which affect the operating model of the organization and the way decisions get made. Culture affects a company’s ability to attract and retain talent. Companies with strong cultures, where management is transparent in its decision-making and employees trust that their wellbeing is always top of mind, had an easier time managing through the pandemic.
Customers are also looking at corporate culture when they are deciding how to spend their money. Think of some of the companies that took a hit in the market over the last year, not because of their products but because of public comments made by their CEOs.
Successful execution of a company’s strategy depends on its culture. Do the decisions that are made align with the company’s stated values? Does the company’s leadership model those values? How does leadership respond to world and national events that profoundly affect the company’s employees and customers?
Boards of directors need to challenge leadership on how they operationalize their values and should encourage the use of culture audits to measure how well culture is embedded in the organization.
What Is the Future of Work?
One takeaway from the pandemic has been that the WFH model is working well for many people, though not for everyone. Many employees have embraced the freedom, flexibility and quality of life that comes with working from home, and companies are seeing continued success and productivity in that mode. The biggest downside is the effect on personal relationships at work, and for companies with strong corporate values, culture. Because of these concerns, future work will probably settle into a hybrid model, where people are in the office interacting with colleagues and clients at least part time, and where corporate culture can be fostered by peer-to-peer mentoring and observation. The challenge for leaders would be finding the right mix of productivity and quality of life for their workforce. Whatever that mix, communication will be crucial – it will need to be much more frequent, clear and consistent since employees will rely on it more when in-person observation of behavior is reduced.
Another significant impact on the future of work is the increasing use of robotics and artificial intelligence to automate many functions currently performed by humans. For companies, this raises questions about the actions that they need to take to upskill their employees. Not every employee will be willing to change, but companies need to develop training modules for employees to explore different opportunities for jobs that we know are coming in the future.
Productivity remains a key goal. Growth in productivity was anemic in the U.S. before the pandemic but received a big boost over the last year. We need to take the lessons learned from the pandemic to continue to raise productivity going forward. Finding the balance between productivity and quality of life will be the challenge for employers.
What Is the Economic Outlook?
Asia leads on the global recovery curve with strong growth, its biggest threat being a strong U.S. economy. Overall, 2021 and 2022 are expected to be very good years for the U.S. economy, but absent further government action, not all economic tiers will benefit equally. Policy missteps in other parts of the world, notably Europe, also could impact U.S. results.
Europe will experience lower growth as it continues to struggle with the vaccine roll-out. South and Latin America will struggle for the same reason.
The questions summarized in this blog are only some of those the panelists addressed, and there were many more questions that I wanted to ask before we ran out of time. On reflection, I was especially struck by the optimism I heard. Despite all that we have endured, the Protiviti Advisory Board members had a positive message for the future: We’ve survived an unimaginable year of stress but we are emerging with a tremendous number of learnings about what we can do as leaders for our companies, our employees and the larger communities.
Companies have been pushed out of their comfort boundaries and are rethinking what they’re doing on many levels, including finding better ways to work. Leaders are stepping up and tackling issues that extend beyond their own organizations. And maybe there is an opportunity for governments to learn and to model the resilience and agility demonstrated by businesses and business leaders.
For those in leadership positions, the focus now should be on the following questions: What’s going great? What’s going so-so? What’s not going so well? Answering those questions will allow organizations to move ahead with confidence into the “better normal.”
Read additional posts on The Protiviti View related to ESG and Cyber Resilience. Also, explore the VISION by Protiviti theme on the Future of Work.