80 % of NEDs Believe Current Board Practices and Structures Are Inadequate to Oversee AI: Gartner
According to a new survey from Gartner, 80 percent of
non-executive directors (NEDs) believe their current board practices and
structures are inadequate to oversee AI effectively. However, 91 percent of
NEDs view AI as an opportunity for shareholder value rather than a risk.
"Boards are remarkably optimistic about AI's potential
value, even more so than chief executive officers (CEOs), chief information
officers (CIOs) and other executives, when compared across Gartner
studies," said Daniel Sanchez Reina, VP Analyst, Gartner. "However,
most boards recognize they are not well-equipped to oversee AI because most
board members are not digital natives and lack technology backgrounds. Until
recently, technology topics rarely took significant time on board agendas. But
cyber risk and AI are changing that, and NEDs are moving quickly to increase
their tech-savvy and find new ways to provide oversight."
Cyber Risk is Universally Perceived as a Threat to Shareholder Value
Boards also show strong agreement on cyber risk, with 93
percent seeing it as a threat to shareholder value. Additionally, they express
similar concerns about the ability of the board to oversee rapidly evolving
cyber-risk threats, with 67 percent rating current board practices and
structures as inadequate to oversee cyber risk.
"NEDs almost universally recognize cyber-risk threats
and express concern about current board practices to provide effective
oversight. However, the majority of NEDs (58 percent) express a desire to take
more technology risk rather than less," said Tina Nunno, Distinguished VP
Analyst and Gartner Fellow.
Boards Advocate for Technology Investments to Boost Shareholder Value
NED interest in AI, cyber risk and technology more broadly
extends to investments. When asked to identify the top five investments that
would lead to greater shareholder value in the next two years, AI was the
number one choice overall, and in the top five of 63 percent of respondents.
Technology other than AI was in the top 5 of 57 percent of the respondents and
cyber-risk investments for 39 percent.
"Boards have moved beyond curiosity about AI and are now
actively engaging their CEOs and management teams to understand opportunities
to use AI to deliver efficiencies and drive new revenue opportunities,"
said Nunno.
To address technology-driven opportunities and gaps in
current board oversight structures, boards intend to recruit more NEDs and CEOs
with technology and cyber-risk expertise. 77 percent of NEDs said they will
need to assign more directors with technology expertise in the next 12 months.
Additionally, 72 percent said they will need to recruit more directors with
cyber-risk expertise, while 53 percent believe that the technology expertise of
the next CEO is a significant factor in succession planning.
"NED willingness to make structural changes to boards,
and shift their CEO recruiting profile, indicates that they believe that
technology will be a critical driver of shareholder value going forward,"
said Nunno.
In 2025, NEDs will be looking to CIOs and chief information
security officers (CISOs) to help them understand the opportunities and risks
for their industries and enterprises. However, they may need to adjust how they
communicate with their boards.
"The surveyed NEDs expressed a strong preference for the
communications provided by their CEOs and chief financial officers (CFOs),
which are often heavily financial in nature and directly link to financial
statements," said Nunno. "Whenever possible, CIOs and CISOs should
focus on communicating in terms of financial impacts and risks to increase the
impact of their communications."
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