Overseeing and discussing the issues
Overall, just over half (54 percent) of respondents say their main board has primary oversight of relevant geopolitical risk issues. The other panels mentioned with any significant frequency are the risk committee (named by 17 percent of respondents) and the audit committee (15 percent).
The main board is given the task more frequently at bigger companies: 67 percent of large-cap respondents and 65 percent of mega-cap respondents say their main board has primary oversight in this area, compared with 47 percent of mid-caps and 46 percent of small caps.
These differences are largely attributable to preferences of assigning the audit committee primary oversight. Almost a quarter (23 percent) of respondents at small-cap companies and 18 percent of those at mid-cap companies say their audit committee is given that role. In comparison, just 8 percent of those at large-cap companies and none of those at mega-caps say the same.
The patterns are broadly similar when it comes to the economy. More than four in 10 respondents (46 percent) say primary oversight of relevant economic risk issues lies with the main board. Almost a third (31 percent) point to the audit committee and 13 percent mention the risk committee.
Again, the preference for the main board having primary oversight is more pronounced among respondents at larger companies. Thirty-eight percent of those at small caps say their main board takes on that role, compared with 41 percent, 56 percent and 59 percent of those at mid-caps, large caps and mega-caps, respectively.
Just 6 percent of those at mega-cap companies say their audit committee has primary oversight of relevant economic risk issues, compared with 25 percent, 37 percent and 44 percent of those at large caps, mid-caps and small caps, respectively.
More than four in 10 respondents (46 percent) say the body with primary oversight of geopolitical risk issues reports on those to the main board at every board meeting. The next-most frequently mentioned option is ad hoc reporting, mentioned by 16 percent of respondents, while 12 percent say there is no such reporting.
The patterns are largely similar across different sizes of company. But a combined 42 percent of respondents at small-cap firms say there is either ad hoc or no such reporting, compared with 25 percent of respondents at mid-caps giving either of those responses.
In general, reporting on economic risks takes place more frequently than reporting on geopolitical risks. More than half (56 percent) of all respondents say reporting on economic risks to the board takes place at every board meeting and just 6 percent say such reporting doesn’t take place at all.
Almost two thirds (65 percent) of those at mid-cap companies say reporting to the board on economic risks happens at each board meeting, compared with 51 percent of those at small-cap companies and 47 percent of those at large and mega-cap firms.
Sixty-two percent of respondents in North America say reporting takes place at every board meeting, while only half as many (31 percent) of those in Europe say likewise.
More than four in 10 respondents (42 percent) say that in the past 12 months their main board has discussed geopolitical risk issues at every board meeting. Almost three in 10 (28 percent) say such discussions have taken place on an ad hoc basis, while just 6 percent say their board hasn’t discussed these issues.
Discussions of geopolitical risks take place more regularly at bigger firms. Less than a third of respondents at small-cap companies say their board talked about these topics at every meeting over the past year
This compares with 38 percent, 53 percent and 71 percent of those at mid-cap, large-cap and mega-cap companies, respectively.
More than four in 10 respondents at small-cap companies (46 percent) report their board having those discussions on an ad hoc basis, compared with 30 percent of those at mid-caps, 22 percent of respondents at large caps and 12 percent of those at mega-cap companies.
Discussions of economic risk issues have taken place more frequently than discussions of geopolitical risks over the past 12 months. Overall, almost two thirds of respondents (64 percent) say their board talked about economic risks at every meeting, with 22 percent saying those discussions happened on an ad hoc basis.
Again, economic risks have been discussed more regularly at bigger companies. Just over half (56 percent) of respondents at small-cap companies report such discussions having taken place at every board meeting over the past year. This compares with 64 percent, 69 percent and 76 percent of respondents at mid-cap, large-cap and mega-cap companies, respectively.
Conversely, discussions have been had on an ad hoc basis according to a third of those at small caps, compared with 23 percent, 17 percent and 12 percent of those at mid-caps, large caps and mega-caps, respectively.
Respondents were asked to rate how the frequency with which the main board discusses geopolitical issues has changed compared with two years ago and three years ago using a five-point scale where one represents the frequency having ‘largely increased’ and five represents the frequency having ‘largely decreased’.
Overall, almost three quarters of respondents report a slight (53 percent) or large (20 percent) increase over the past two years in the frequency of board discussions of geopolitical issues and just 2 percent report any kind of decrease, giving an average score of 2.1. There is a slightly greater increase in the average frequency of board discussions over the past three years, with an average score of 1.9.
The average scores over the past two years are broadly similar across respondents at different company sizes and between those in Europe and North America. Almost a third (31 percent) of respondents at small-cap companies say there has been a large increase in the frequency of such discussions in the past two years.
Overall, there has also been an increase over the past two and three years in the frequency with which boards discuss economic issues.
The increase is slightly less marked than for discussions of geopolitical issues, but still only 1 percent of respondents report any decrease in frequency. In total, 62 percent of respondents say the frequency of discussions on economic issues has seen a slight or large increase in the past two years.
On average, respondents at mega-cap companies indicate less of an increase (2.4) than do those at small-cap companies (2.2), mid-caps (2.2) and large-cap firms (2.1).
Almost three in 10 (29 percent) of those at mid-cap companies say there has been a large increase in the frequency of board discussions around economic issues.
On average, respondents in North America report more of an increase (2.2) than do those in Europe (2.4).
There have been many important issues in the spotlight with potential implications for companies this past year, including a number of issues that many boards may not have discussed in the past.
Overall, the most frequently mentioned economic/geopolitical topic boards have discussed over the past year is economic growth/recession, cited by 95 percent of respondents. That is followed by inflation (93 percent of respondents), the war in Ukraine (84 percent), racial equality (46 percent), gender pay gaps (43 percent), domestic elections (36 percent) and political lobbying and spending (24 percent).
Just 7 percent of respondents report that their board has discussed reproductive rights over the past year. This is perhaps surprisingly few, given the likely widespread impact on employees of US companies of the Supreme Court overturning Roe vs Wade. Governance professionals expect at least some US firms to face shareholder proposals in 2023 on the topic of reproductive rights.
More respondents at larger firms say their board has discussed several issues. For example, 15 percent of those at large caps and 12 percent of those at mega-caps say their board has talked about reproductive rights. This compares with 6 percent of those at mid-caps and none of those at small caps.
All mega-cap respondents and 97 percent of those at large-cap companies say their board has discussed the war in Ukraine, compared with 77 percent and 76 percent of those at mid-cap and small-cap companies, respectively.
Respondents in Europe more frequently report their board having discussed the war, domestic elections and gender pay gaps than do those in North America.
