Emerging Market Boards Navigate Increasing Uncertainty: Insights from a Global Study

Steering Through Uncertainty in Emerging Markets

A recent global study by the Boston Consulting Group (BCG), in collaboration with Heidrick & Struggles and INSEAD, reveals the unique challenges faced by boards in emerging markets amid escalating uncertainty. The study, titled "Governance Under High Uncertainty: Opportunities for Emerging-Market Boards", suggests that the landscape of corporate governance is evolving due to various external pressures including geopolitical volatility, economic disruptions, and climate-related risks.

Understanding the Landscape of Uncertainty

According to the report, the current state of uncertainty is not just episodic; it is characterized by rapid changes and is driven by unforeseen events that challenge traditional risk management strategies. Unlike predictable risks, these challenges are more complex and multifaceted, influencing governance practices at both macro and micro levels.

Through a series of interviews and roundtable discussions with over 100 senior directors across various emerging markets, the report highlights the increasing interaction between global and local pressures. International shocks such as trade disruptions and technology shifts further heighten the challenges, thereby putting additional strain on governance frameworks that are still maturing.

The study identifies a composite impact on boards due to these pressures, noting that while these challenges can be overwhelming, they also present opportunities for significant governance improvements. Key strategies being employed involve enhancing fundamental governance practices such as clarity of roles, risk assessment, and crisis planning, alongside fostering a culture of trust and collaboration.

A Dual Approach to Governance

According to Burak Tansan, Managing Director and Senior Partner at BCG, effective corporate governance in this climatic environment hinges on more than just established processes; it requires innovation in board composition and quality of discussions. Boards that integrate diversity and independent perspectives with sector-specific expertise are better equipped to spot emerging risks and opportunities.

Furthermore, maintaining a balanced renewal of board composition in line with strategic priorities is regarded as paramount to sustaining robust governance.

Jeremy Hanson, a partner at Heidrick & Struggles, emphasizes that today’s boards function in an environment where uncertainty is not merely an exception, but rather the norm. This new reality has made it imperative for governance to combine discipline and foresight, with the establishment of constructive debate and decision-making arenas becoming critical.

Strengthening Governance Beyond the Company

The report not only focuses on internal governance but also highlights the vital role boards can play externally. By engaging constructively with regulators, policymakers, and industry peers, boards in emerging markets have the potential to strengthen governance standards within their local environments. This additionally contributes to institutional resilience and builds stakeholder trust.

Annet Aris, Senior Affiliate Professor of Strategy at INSEAD, notes the necessity for boards to transition from reactive oversight to deeper learning, dialogue, and engagement. Embedding decisions within a framework of purpose and values while remaining open to diverse perspectives is essential for creating resilient governance structures.

A Practical Framework for Resilience

The report concludes with a pragmatic framework to assist boards in assessing their readiness for high uncertainty environments. This evaluation hinges on three dimensions: structural processes, the soft levers of trust and behavior, and ecosystem management beyond the corporate sphere. Together, these elements serve as a roadmap for boards seeking to govern effectively amid an increasingly complex and unpredictable landscape.

In summary, as boards in emerging markets grapple with these multifaceted uncertainties, they possess the unique opportunity to not only improve their internal governance but also contribute significantly to enhancing the economic and societal fabric of their regions. The insights derived from this research could serve as a valuable guide for boards aiming to navigate the turbulent waters ahead.