The Top Risks Facing Corporate Boards in 2024

Today’s businesses are facing an evolving set of challenges and risks. To thrive in the current environment, executive boards will need to adapt and develop new risk management strategies and communicate these plans clearly to their employees and stakeholders.

The first step, of course, is to identify the specific risks faced by your business or industry. As of 2024, corporate governing boards can expect to face unique challenges in the following areas. 

AI Risk

It’s almost become cliche to speak of the ways that AI is changing the world of business. But for all the promise that AI presents, corporate boards should be cautious about the risks it poses. 

For example, AI-powered programs rely on corporate data to boost effectiveness and improve accuracy. But using data in its raw form can potentially expose you to security breaches or even regulatory violations, depending on your industry.

Companies can solve these challenges with methods such as federated learning, where AI has access to company records without granting others the same privilege. Alternatively, you can rely on homomorphic encryption, which enables AI to learn from encrypted data that others can’t read.

Generative AI can raise other concerns as well. Boards should take steps to devise policies to govern AI-generated content, taking into account how it relates to intellectual property rights or other legal concerns. 

Global Risk

Global conflicts in both Ukraine and the Middle East are just two prominent examples of ongoing geopolitical instability. You don’t have to be a multinational corporation to feel the impact of this global risk. Global unrest has a direct impact on your supply chain as well as your access to certain raw materials and energy, depending on your industry.

Boards can take steps to mitigate this risk by diversifying the supply chain, sourcing materials from a broader network, and developing contingency plans in the event of another disruption. In fact, boards should regularly conduct scenario planning in order to brainstorm potential risks and devise effective strategies to keep moving forward.

Your stakeholders don’t expect you to have a solution to every possible problem. However, communicating your awareness of potential challenges can assure investors and analysts that your company has the resilience needed to navigate a rapidly evolving geopolitical landscape.

Economic Risk

Even the greatest financial experts are uncertain about whether the economy will rebound following record inflation or whether another recession remains on the horizon. This creates a greater demand for companies to navigate economic uncertainty with confidence and make plans for multiple contingencies.

After all, even if the economy improves, corporations still face challenges posed by high rates of inflation and high interest rates. Inflationary pressures have created challenges in managing overhead costs, while interest rates have created challenges in securing additional funding.

As with global risk, boards can navigate economic risk by devising contingency plans for every foreseeable outcome. The more you can plan for these types of risks, the more confident you — and your stakeholders — can be in your financial health.

Regulatory Risk

Today’s business leaders face an evolving regulatory environment, especially considering the increasing demands placed on companies that adopt ESG criteria. Not only do these criteria require additional care to minimize environmental impact, but your business will also need to track data that demonstrates a commitment to sustainability.

Your executive board should therefore keep these priorities in mind, seeking to integrate environmental priorities into your core business strategy. Additionally, leaders should keep up with changes to the regulatory environment. Emissions standards and other major criteria change regularly, and your organization will need to adapt its strategies to maintain compliance.

Of course, environmental policies are only one strand of ESG standards. Companies can expect other demands relating to social policies and DEI initiatives, all of which require careful documentation and verification.

Cybersecurity Risk

AI isn’t the only way that companies can be exposed to data breaches and security threats. Today’s cyber criminals attack organizations through multiple means, ranging from phishing scams to brute force attacks and social engineering attacks. And that’s to say nothing of the ways that employees can inadvertently reveal sensitive information through email communications or by removing physical media from the office.

In light of these challenges, corporate boards should aim for a comprehensive cybersecurity plan. Ideally, your CISO can work alongside other key departments to bring the entire organization into alignment. 

Every cybersecurity plan should address risk in two distinct ways. First, your plan might focus on preventive strategies such as software, firewalls, and company-wide training. But you’ll also need to devise a clear response strategy to mitigate the risk if a cyber attack does occur. Providing clear accountability to team members will allow you to respond to a data breach quickly and effectively.

Reputational Risk

In today’s social landscape, it’s not unusual for companies to face reputational risk. In some cases, this risk can arise from scandals within the company, though it can also result from shareholder pushback to your company’s policies. 

The rise of “shareholder activism” also points to the way that investors seek greater influence over the companies they invest in, expecting that the company’s values will mirror their own.

It’s impossible to please everyone, of course. And sometimes, responding to rumors and social media accusations only gives oxygen to naysaying speculation. Boards should instead focus on being proactive by communicating regularly and clearly with stakeholders. 

Some of the current confusion seems to surround ESG criteria and exactly what that means. Companies should pursue transparency regarding their ESG plans. Maintaining clear communication may appease investors and cut off rumors before they even begin.

Naming Your Key Areas of Risk

Navigating risk demands careful planning, strategy, and communication. It also demands an acknowledgment of the kinds of risks your company is facing. By naming your key areas of risk, you’ll be better able to develop strategies to keep your company moving forward, and this will give your investors greater confidence in your ability to navigate today’s changing business terrain.