Stakeholder demands are changing, so how can business respond in the most efficient and effective way?
Todays Boards are under increasing pressure from regulators and customers alike to engage more broadly with stakeholders and build their views and expectations into the strategy and management of the business. They’re also facing growing calls to increase boardroom diversity, not only through more women and people from under-represented groups, but also by broadening the range of expertise and perspectives within the leadership team.
Key considerations to respond changing stakeholder demands
Tackling the growing governance challenges can be difficult for all businesses. Yet, it can be especially problematic for dynamic mid-size enterprises, which often lack the board-level diversity, developed governance structures and stakeholder engagement mechanisms of their larger and more established counterparts. And while these enterprises may be adept at capitalising on disruption and change, they may be less clear about how to manage the inherent risks of growing at speed.
There is no one-size-fits-all blueprint – the stakeholder expectations and the forces shaping them vary from business to business and market to market. Nonetheless, there are key considerations that all businesses should address.
Fit for the future
Addressing the challenges is likely to require a broader-based and more proactive approach to governance and decision making. Yet, if there are challenges, there are also benefits. Keeping your ear closer to the ground can improve your ability to stay ahead of market disruption and fast-shifting customer expectations. In turn, more diverse boards improve performance and value creation by bringing in broader and more original perspectives on the one side and helping to curb the risks of complacency and ‘group think’ on the other.[i] And making sure your governance is equipped for the new market realities will not only strengthen your commercial and employer brand, but also help you to steer clear of reputationally damaging surprises and be in a better position to manage and mitigate them if they do break out. Ultimately, businesses prosper within communities that are themselves prospering.
Views of wider stakeholders
Stakeholders worldwide are demanding a greater say in the direction of the businesses that impact on their lives and livelihoods, be this as employees, customers, suppliers, investors or citizens within the community in which the company operates. With a further push coming from politicians like Mr Ramaphosa or Prime Minister Theresa May in the UK, businesses are also under increasing pressure to align their interests with those of society as a whole.
But how are businesses responding? We asked the 2,500 executives from 35 economies taking part in the Grant Thornton International Business Report (IBR) survey if they actively seek out the views of wider stakeholders. Given the pressure, it’s surprising that more than third of participants are not seeking out the views of wider stakeholders. In the EU, it’s nearly half.
Risks of insufficient stakeholder engagement
The immediate risks of insufficient stakeholder engagement include being caught unawares by reputational crises or business failures. If you’re a fast-growing business, you might assume that you have the future on your side. Yet it’s easy to lose sight of the regulatory and reputational risks that can be thrown up by rapid expansion. Our IBR research shows that dynamic midmarket businesses primarily focus on value and market share, rather than regulation. A structured approach to governance and risk is vital in meeting stakeholder expectations and sustaining your licence to operate.
Are you prepared?
Organisations are held accountable for accuracy and integrity in their business operations and they must have effective and reliable governance and compliance procedures in place. Additionally, they must understand and manage risk and seek an appropriate balance between risk and opportunities.