Measuring The Digital Quotient In Corporate Governance For Industry 4.0
UK business is in a bit of a pickle when it comes to technological transformation. It is happening so fast around us, this Fourth Industrial Revolution, yet all the evidence suggests that it is just not high enough on the boardroom agenda across industry sectors. Brexit has dominated for over two years while defying definition. A mixture of fear, ignorance, and the self-reinforcing fear of ignorance is in danger of holding back human and business potential, regardless of an exit from the European Union.
FTSE 350 directors need to be up to speed on issues involving the revolution in technology, rather than delegating them to a single IT function. For when it comes to cyber security, possibly the single greatest issue most likely to cause rapid corporate meltdown in terms of loss of profits, customers and reputation, it is now quite clear where the financial regulator stands.
This week saw the Financial Conduct Authority (FCA) fine Tesco Bank £16.4 million for its failures in a cyber attack in 2016. The draft penalty was £33.6 million, but Tesco agreed to settle, co-operated fully and was quick to compensate customers. Listen to the language used by the regulator and you should be left in no doubt that this is just the beginning of a crackdown on lazy thinking when it comes to customer’s data and money.
“The fine the FCA imposed on Tesco Bank today reflects the fact that the FCA has no tolerance for banks that fail to protect customers from foreseeable risks. In this case, the attack was the subject of a very specific warning that Tesco Bank did not properly address until after the attack started. This was too little, too late. Customers should not have been exposed to the risk at all” said Mark Steward, FCA Executive Director of Enforcement and Market Oversight.
“Cyber security requires resilience” he went on to say. “A financial institution’s board is ultimately responsible for ensuring that its cyber crime controls are designed to meet standards of resilience.” The fine was, in the FCA’s words, for Tesco “failing to exercise due skill, care and diligence” in protecting its personal current account holders against a cyber attack.
I have covered issues around boardroom responsibility and cyber security previously on Board Talk, and they do not relate only to financial institutions. A few years ago, on the back of a Mckinsey report just out at the time, I wrote on Forbes about the need for a digital quotient to better measure good corporate governance.
The need is even greater now, as we begin to learn about the possibilities that automation and artificial intelligence can bring to businesses and the human talent that lies behind their creation. (In case you missed it, I have previously even covered exciting new ideas to measure corporate governance using AI.)
But in the first instance, understanding how to use data well is an essential first step for business regardless of industry sector. It goes hand in hand with a willingness to accept that innovation needs to claim a critical seat in the boardroom - something which is just not happening, and the UK is not alone in that failure. It is a failure that is most likely related to old-style company structures, and also to old but familiar recruitment procedures which may no longer be fit for purpose.
The UK government has been stressing the critical need for digital transformation for years and is taking collaborative action on a number of fronts. Business Secretary Greg Clark and Siemens CEO Juergen Maier recently chaired the inaugural meeting of the Made Smarter Commission, which has been established to drive forward digital developments in British manufacturing.
The commission, which includes senior members from Airbus, EEF, BAE Systems and the TUC, follows the Made Smarter Review in November 2017. It intends to look at how the manufacturing industry can be transformed by new techniques such as 3D printing and other innovative uses of digital technologies. It also intends to discuss the need for stronger and more ambitious leadership.
There is a lot at stake. On UK manufacturing, Business Secretary Greg Clark last week said: “The increased adoption of digital technologies will bring enormous benefits potentially generating £455 billion over the next 10 years - boosting productivity, creating thousands of new highly skilled jobs and enabling more efficient, cleaner production systems.”
In healthcare too - a sector ripe for digital disruption - the UK government recently held a competition to find the breakthrough technologies that could revolutionise the sector, and change lives for the better.
A report by Tech Nation suggests that the digital technology sector is expanding 2.6 times faster than the rest of the UK economy. It is worth almost £184 billion to the country, boasting a job increase that is five times the rate of the rest of the economy.
This also means there are roles around now that did not exist five years ago, in cybersecurity, data protection, data science and AI/machine learning. Yet according to Robert Half, the staffing specialists, adequate staffing for these roles is an issue. A recent survey by them reveals that nearly three in 10 (29%) of CIOs state that their teams are understaffed, increasing to 42% for those in large companies, a staggering percentage.
If companies do not even know how to capture the data on their work forces (and there is much evidence that they do not, or that they do not make it a priority) where and how do they begin to think about the need to re-skill their workforce ? Diversity and inclusion remain a critical need for business on every level, including the boardroom. To achieve it, businesses must learn about using data, and use it well.
Tech Nation’s report points to interesting nuances on diversity and inclusion that should also provide businesses with food for thought. Its survey of the UK digital tech workforce found that just 19% was female, compared to 49% across all UK jobs. But BAME digital tech workers are represented at 15%, significantly higher than the 10% across all UK jobs.
Digital snapshots such as these need to be available to every FTSE 350 business to use to be productive to the best of its ability and agile going forward. Many are likely to have focused on data only in to look outwards at opportunities for marketing, rather than inwards for structural change. The UK’s business secretary Greg Clark recently warned that the government is ready to legislate to protect the misuse of the personal data of customers by big business.
UK business may feel it has been juggling with a blindfold over its eyes for awhile. But there is nothing stopping it from removing a wilful blindfold to take a long hard look in the mirror and ask for help to appraise its digital quotient to best move forward.
Photo credit: Dlanor S on Unsplash