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Increasing Challenges for Emerging Market Boards

In an era characterized by heightened uncertainty, boards of directors in emerging markets are reevaluating their governance practices and decision-making strategies. A comprehensive global study conducted by the Boston Consulting Group (BCG) in collaboration with Heidrick & Struggles and the INSEAD Corporate Governance Centre dives deep into the complexities that these boards encounter. The report, titled "Governing Under High Uncertainty: Opportunities for Emerging-Market Boards," provides critical insights into how directors respond to increasing geopolitical instability, economic disruptions, rapid technological changes, climate risks, and evolving societal expectations.

Redefining Governance Practices

The findings suggest that today’s uncertainty differs significantly from traditional risks faced by organizations. Unlike episodic or predictable risks, the current landscape is shaped by a wider array of rapid changes, fueled by unknown unknowns that challenge conventional forecasting and risk management methods. As emerging market boards navigate this landscape, they are not only confronted by global pressures but also by local challenges that compound the complexities of governance.

In many cases, international shocks—such as geopolitical tensions and trade disruptions—intensify existing national challenges rather than replace them. This dynamic tests already maturing governance systems that must adapt quickly to maintain effectiveness.

Strengthening Governance Foundations

Despite numerous pressures, the study identifies significant opportunities for improvement. Boards in emerging markets are increasingly focused on fortifying fundamental governance principles. They emphasize clarity in roles, risk oversight, and contingency planning while also prioritizing trust, organizational culture, and collaborative behavior within the boardroom.

These dual levers—rigid and flexible—allow boards to remain calm and cohesive when faced with uncertainty. As they balance traditional governance measures with a modern approach that embraces collective resilience, boards foster better decision-making practices.

Engagement Beyond the Boardroom

Moreover, the research highlights a vital role that emerging market boards can play beyond their organizations. By engaging constructively with regulators, policymakers, and industry peers, boards can contribute to enhancing governance standards across their markets. This proactive approach not only strengthens institutional resilience but also builds trust among stakeholders, reinforcing the notion that governance extends its influence beyond corporate walls.

Burak Tansan, a senior partner at BCG, underscores that effective corporate governance amid persistent uncertainty relies deeply on the composition of the board and the quality of discussions therein. Boards that embrace diversity, independence, and a balanced mix of strategic and sector expertise are better positioned to identify emerging risks and opportunities. Continuous renewal of board composition in line with strategic priorities is crucial for maintaining robust governance.

Constructive Debate as a New Paradigm

As the report articulates, boards today operate in an environment where uncertainty is a defining condition. Engendering a governance culture that blends discipline, foresight, and constructive challenge is imperative. The creation of spaces for meaningful dialogue and decision-making is more critical than ever. In their quest for resilient and long-term value, boards must embrace this new reality of diverse perspectives and confrontational boundaries.

Annet Aris, a leading academic at INSEAD, asserts that governing in such uncertain times necessitates a shift from reactive oversight to proactive learning and engagement. By grounding decisions in shared objectives and values while welcoming diverse viewpoints, boards can cultivate the resilience needed to thrive in unpredictable environments.

Practical Framework for Boards

In conclusion, the report offers a practical framework designed to help boards assess their preparedness for high uncertainty. This framework invites boards to appraise their governance through three lenses: the rigidity of structure and process, the softness of trust and behavior, and the management of the ecosystem beyond the enterprise. Collectively, these dimensions provide a roadmap for boards seeking to enhance their governance efficacy amidst increasing complexity and uncertainty.

This study serves as a reminder for boards of emerging markets: while the challenges are substantial, the opportunities for transformation and leadership are equally significant.