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Digital Transformation: What Corporate Directors Need to Know

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By Wes Bricker, Vice Chair – U.S. Trust Solutions Co-Leader, PwC U.S.

“Transformation” is no longer just a business buzzword—it’s critical for a company’s success and survival amidst competition and economic uncertainty. But oftentimes, businesses struggle with understanding what transformation, specifically digital transformation, really means—and how to do it well (hint: it begins at the top).

Organizations should focus on building a culture that embraces digital transformation, beginning with the C-suite and board of directors and spanning throughout the organization. At PwC, we use a human-led, tech-powered approach to address the biggest transformations—for our firm and our clients—and companies should look for ways to empower their people to adopt new technologies that drive meaningful change throughout the organization. 

Here are a few key areas where boards and transformation-minded leaders may consider focusing their efforts to create sustained outcomes.

Talent Management

Throughout the past two years, businesses have undergone extensive and abrupt digital transformations out of necessity to adjust to the COVID-19 pandemic, including transitioning to remote and hybrid work environments and implementing new technology to manage these new working models. For corporate boards, this required a shift in thinking about their IT, risk management and human capital strategies. Traditionally, directors focused their talent management efforts on the C-suite, leaving senior executives to oversee the broader workforce. However, the pandemic, investor pressure to advance diversity and inclusion efforts and the pace of business and digital change have made it critical for boards to provide greater oversight of talent management at multiple levels of the organization.

We saw this in a survey of directors at PwC’s Corporate Directors Exchange event earlier this year. Nearly every board member in attendance said they were somewhat concerned (42%) or very concerned (56%) about the shortage of skilled workers and the need to upskill their workforces. 

As companies continue to define their “new normal,” oversight of previous and future digital transformations impacting the workforce is critical, and corporate directors should make sure that their company’s approach to talent supports its long-term objectives. But it’s important to remember that there’s no one-size-fits-all solution. Boards need to align their organization’s performance, talent, and environmental, social and governance (ESG) goals to drive stakeholder value.

Tech-Enablement

As business leaders look for ways to transform their organization, it’s important to identify how digital tools can help automate and enable different functions, including audit and tax

Audit committees are responsible for overseeing internal controls and reporting related to financial audits, and they are increasingly tasked with overseeing non-financial reporting and processes as well. This is becoming even more critical as companies plan for a future that requires some ESG reporting and potentially independent assurance. 

Upskilling in the finance function is also important. These teams are a crucial part of any organization’s talent pool and should not be overlooked when it comes to digital upskilling. It’s important for corporate directors to help implement digital transformations that can automate repetitive tasks often found among finance teams, freeing their people to focus on more analytical responsibilities to help gather information more accurately, efficiently and consistently. Investing in their capabilities helps drive audit quality, increase efficiency and create stakeholder value.

The benefits of investing in digital transformation and upskilling extend beyond financial reporting and tax compliance. Many organizations leverage internal audits to review cyber processes and controls, including resilience and response. As cyberattacks become more prominent—and cyber concerns increase among executives, corporate directors, investors and policymakers—implementing additional reviews and tools to support cyber is increasingly important. Directors must better understand cyber risks, while external auditors can provide perspective on cybersecurity controls related to financial reporting processes. 

ESG Initiatives

With the U.S. Securities and Exchange Commission’s recently proposed climate change disclosure rules, the Corporate Sustainability Reporting Directive (CSRD) in the EU, and increased demand from stakeholders for investor-grade, consistent ESG information, businesses are facing challenges in adjusting how they manage and report on ESG initiatives. To meet these demands, organizations may need to transform how they gather ESG data to develop investor-grade data that accelerates their reporting processes while implementing effective governance and internal controls.

Similar to the ways audit committees oversee financial reporting, corporate directors will need to provide oversight of ESG reporting, including climate change, human capital and more, to ensure that there are proper internal controls in place and that data is consistently and accurately prepared. Boards need to create a clear vision for the company’s ESG strategy and guide management in creating a technology strategy that supports data collection and internal control systems that are appropriate today and can evolve to meet future compliance and external audit needs. This will require a transformation in how many businesses think about ESG issues and reporting, including introducing new protocols, upskilling or hiring new employees with the right skills, and implementing new technology. 

The bottom line: digital transformation—and the agility to implement changes quickly—is critical in an ever-changing environment. The need for business executives and corporate directors to understand digital transformation and incorporate it into overall strategy isn’t going away. If anything, it’s more important than ever.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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