Risk and compliance: FTSE 350 Boardroom Bellwether survey

A summary of the risk and compliance findings from the report.

Risk and compliance: FTSE 350 Boardroom Bellwether survey

The FTSE 350 Boardroom Bellwether is a yearly survey by the Financial Times and The Chartered Governance Institute UK & Ireland that seeks to gauge the sentiment inside British boardrooms. It canvasses the views of FTSE 100 and FTSE 250 company secretaries to find out how boards are responding to the challenges of the economy, market conditions and the wider business and governance environment.

Questions cover a range of business concerns, topical issues and specific governance matters to provide unique insight into what British boards are thinking. Some questions change from survey to survey, but the core remains the same to reveal trends and shifts in opinion.

The report summarises the key findings of the latest survey, which took place in April and May 2022.

While we had a solid response rate from the FTSE 100, fewer FTSE 250 responded than usual and where referred to these should be regarded as indicative.

Top three risk factors

Risk and compliance

With war having broken out in Europe, boards’ perception of risk has flipped since the last survey in summer 2021. Almost 4 in 5 (79%) respondents say their exposure to risk is increasing. ‘Global economic risks’ is given as the most common major factor (40% of the respondents who answered that risk is increasing), followed by ‘geopolitical tension’ (27%) and ‘cyber risk’ (23%), much of which is attributable to the conflict in Ukraine.

Climate change, which in summer 2021 was the most common major risk factor (given by 28% of respondents), is cited this time by only 10% of those who believe risk is increasing. The pandemic, artificial intelligence and growing trade protectionism were offered by the survey as possible major risk factors but ticked by no one. This means there is more consensus on the main risks than in previous years.

The survey asked about boards’ views on the main issues related to the war in Ukraine, inviting them to choose and rank several options. Ensuring compliance with sanctions is the biggest concern: 63% of respondents include this in their answer, with 47% giving this as their top or only response. Reviewing supply chain commitments with Russia comes next, appearing in the answers of 47% of respondents, with 26% putting it as their top or only answer. The safeguarding of employees is the next most important issue: 39% include this in their answer, with 11% putting it top or as their only response. Reviewing business commitments with Russia is similarly notable, as 29% cite it in their response, and 13% put it as their top or only answer. This was evidently not an exhaustive list of possible issues for boards, however: 11% include ‘other’ in their answer.

Boards’ exposure to cyber risk is increasing, according to 87% of respondents, with the rest saying it’s going neither up nor down. No one says it is reducing, the first time since 2014 that this has happened. Otherwise, the figures are similar to the summer 2021 responses (88% increasing, 2% decreasing and 10% neither). Some 82% of all respondents also said they were increasing spending on mitigating the risk.

While there is evidently much concern over cyber risk, fewer respondents than in the summer of 2021 say they have discussed or reviewed the NCSC’s Cyber Security Toolkit for Boards (42% this year compared to 50% last year). Not everyone chose to answer the question about what action they have taken following discussion or review of the Toolkit (81% of those who had discussed or reviewed), but the responses of those who did range from ‘none’ to ‘established a dedicated cyber security committee’ and ‘we have a risk programme in place based on the NCSC Toolkit’.

Artificial intelligence (AI) is being discussed by a greater proportion of boards than in the summer of 2021: 58% say they have discussed the risks and opportunities, up from 42% last year. Broken down by company size, it’s the larger companies that are more likely to be discussing AI at board level. Of those who had discussed it, 77% are FTSE 100 companies and 23% FTSE 250s. Of those who hadn’t discussed it, 44% are FTSE 100s and 56% FTSE 250s.

The FTSE 350 Boardroom Bellwether 2022 survey by the Financial Times and The Chartered Governance Institute UK & Ireland is now available. Take a look at the views of FTSE 100 and FTSE 250 company secretaries now:

https://www.cgi.org.uk/knowledge/research/bellwether-2022

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