It is about avoiding groupthink.Felicity Caird, Institute of Directors NZ\nLess than a third of directors think their boards have the right capability to lead the digital future of their organisation,according to the latest survey by the Institute of Directors\nDigital leadership and data governance are key to success and business transformation. \nYet, only 30 per cent of directors think their boards have the right capability to lead the digital future of their organisation, down from 35 per cent in 2016, according to the latest Director Sentiment Survey.\nForty three per cent of respondents are unsure or neutral, and 27 per cent don\u2019t have the right mix of knowledge, skills and experience to provide leadership and governance in a digital era.\n\u201cThis may indicate a greater awareness of the need for digital leadership and what it entails,\u201d says the Institute of Directors (IoD), which conducted the survey last month among 934 of its members.\nThe survey, now on its fourth year, reveals key challenges for New Zealand boards, including stakeholder interests, leading on organisational ethics, strategy and risk in the age of technological disruption, and access to skills and talent in a tight labour market. \nNo caption\nThe ability for directors to navigate the rapid changes caused by the digital revolution is a key challenge, and should be a priority for boardsFelicity Caird, Institute of Directors NZ\nWhen asked about the biggest risk facing their own organisation, labour quality and capability came out on top, cited by 28 per cent of the respondents.\nTechnological disruption is second, with 15 per cent seeing this as a risk to their own business. Concerns over competition (11 per cent) and regulatory red tape (11 per cent) completed the top four. \nThe survey finds data governance and the use of data analytics to drive performance and strategic opportunities have only been discussed by 50 per cent of boards in the past 12 months.\nIt is important for boards to understand both the challenges and the opportunities big data poses, saysFelicity Caird, general manager of the IoD Governance Leadership Centre.\n\u201cIt is about boards being able to engage around the discussions on what is our strategic opportunities and some of our risks around big data,\u201d says Caird. \u201cWhat are our data assets?\u201d\nMeanwhile, respondents note how technological changes are transforming business models.\nThe survey finds 58 per cent of directors (a notable increase from 47 per cent in 2015 and 2016) expect their industry to be affected by major or disruptive change in the next two years.\nMore boards are discussing cyber-risk, 50 per cent this year, up from 32 per cent in 2016. But less than half of boards (45 per cent) felt that they received comprehensive reporting on cyber breaches from their management.\n\u201cIt is critical that all boards put cyber-risk on the agenda and build cyber-resilience,\u201d says IoD.\n\u201cThe ability for directors to navigate the rapid changes caused by the digital revolution is a key challenge, and should be a priority for boards," notes Caird.\n\u201cSocial media and the risk of cyber breaches also mean that companies operate in a more complex environment, where comprehensive ethics reporting and risk management is vital to sustainable success.\u201d\nClaudia Vidal,a chartered member of the IoD, asks, \u201cIf 70 per cent of respondents think they do not have the expertise to lead the organisation into a digital future, what are they doing about it? Is this an aspiration or a critical \u2018must have skill\u2019?\u201d\nVidal, who is an an independent director for Skills4Work Inc, and an advisory board member (industry representative) for ITP's (IT Professionals NZ) Accreditation Board, observes board vacancies are not reflecting this.\n\u201cThe skills sought are usually aligned with the hiring company\u2019s short-term need be it overseas expansion, fundraising, or access to networks. It is really an exception if digital experience is top of the list, and this is not related to the lack of talent,\u201dshe says.\nShe stresses all directors need to be aware cybersecurity is just one aspect of technology.\n\u201cIt is a director\u2019s duty of care to prevent and mitigate risks. In technology risks may be due to lack of a business continuity plan in case of digital meltdown, loss of social reputation, even a number of agile projects not \u2018joining in\u2019 at the end of the digital programme of work. \n\u201cIt is the board's accountability and management\u2019s responsibility to report on cyber risks.\u201d she adds.\n\u201cHowever, the risks tend to change at the same pace attackers change tactics. By the time the risk is reported it may be too late and the risk has eventuated; reporting it will only be useful if the exercise is taken as \u2018lessons learnt\u2019.\u201d\nOtherwise, she says, this is just like looking at the rear view mirror because once it is report, the cyber breach has already occurred and harmed the company in some way.\nThe consequences include customers losing confidence on the security of their data and walking away, IP gone out the door and lost productivity, she states.\n\u201cIt would be more beneficial if the board focused on understanding how fast would the company be back on its feet if there was a cyber-attack, and what is management doing to minimise an attack happening. Because, cybersecurity experts are adamant that it is not if, but when, the organisation is going to be hacked.\u201d\nNo caption\nThe skills sought are usually aligned with the hiring company\u2019s short-term need...It is really an exception if digital experience is top of the list, and this is not related to the lack of talent.Claudia Vidal\nDiversity on board\nAlthough varying across sectors, 62 per cent of all respondents say diversity is a key consideration in board appointments, which is similar to 2015 (60 per cent) but down from a high of 70 per cent in 2016. \n\u201cDiversity is not something you set and forget,\u201d says Caird.\n\u201cIt is ongoing, it is in that area of continuous improvement, that you are constantly looking at your board skills. It should be happening annually,\u201d she says.\n\u201cBoards should ensure they have the right mix of skills and diversity and what that means for the organisation,\u201d she says. \u201cIt is about avoiding groupthink.\u201d\n\u201cAre you regularly assessing your skills and experiences and capability needs so you have got the right mix and diversity of mix of skills experience and diverse people around the table and that includes gender diversity, for the future needs of your business?\u201d\nCaird says the IoD has focused on how boards need to develop their digital capability.\n\u201cIt is around identifying what the board needs,\u201d she says.\n\u201cYou can do it through upskilling the whole board going in courses, getting experts in, and getting your CIO to come into the boardroom and brief the board.\u201d\n\u201cWe do stress the need for the whole board to lift its capability. You don\u2019t just bring just one technical director on it and expect them to look after the whole digital (capability).\u201d\nSend news tips and comments to firstname.lastname@example.org\nFollow Divina Paredes on Twitter:@divinap\nFollow CIO New Zealand on Twitter:@cio_nz\nJoin us on Facebook.