Key Considerations for Building Tech-Literate Boards in the Age of AI

By Amy Rojik, Former Senior Manager Arthur Andersen, and Managing Principal - Corporate Governance at BDO USA, P.C.

Key Considerations for Building Tech-Literate Boards in the Age of AI

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As technological innovation increasingly drives company operations as well as product and service enhancements, assessing a company's technology strategy is no longer the sole remit of an IT team or CTO, but a core competency of the board. Building technological literacy is now imperative for directors seeking to understand both the strategic and risk implications of a changing technological landscape marked by a new age for AI and rapid technological advancements, exponential data growth, and the ever-looming threat of cyberattacks.

Some of the key technology literacy components that factor into the board’s ability to oversee technological advancement include:

Assessing the Company’s AI and Technological Readiness

Before diving headlong into implementation and adoption, boards should be able to properly assess the organization’s current state of “technological debt.”

Technological advancements can contain hidden and costly pitfalls without proper evaluation. For example, outdated legacy IT systems and upkeep failures in current software can constrain innovation and create security vulnerabilities. Poor data hygiene management can significantly undermine technology implementation plans. Siloed systems can further prevent seamless data flow and process automation, while skill gaps and a culture unaccustomed to significant change pose major challenges to effective implementation and adoption.

Assessing Management’s AI Strategy

Directors need to understand how management is strategically approaching AI in the context of broader business priorities.

  • Is management starting with technology—identifying AI use cases to pursue—or with business priorities, determining where AI may create the most value?’
  • Are the proposed solutions aligned with key business strategy?
  • What criteria are going into management’s prioritization? Is management appropriately considering disruptions occurring in the industry? What about outside the industry?
  • What resources may be needed to execute the AI strategy?
  • How might the regulatory environment shape or constrain the company’s strategy?
  • How are risk appetite and tolerance defined by the board?

Adopting Technology Innovation and Implementation

The next step is understanding how management intends to move forward with technology innovation and implementation in operational areas of the business as well as in product/service development and/or enhancement.

  • Has management defined parameters for what success will look like?
  • Does management have a robust change management plan that considers various impacts to human capital?
  • Is the board able to confirm whether management is using a sound data governance framework that includes:
    • strong data hygiene practices and a clear cybersecurity posture
    • adoption of effective project management and communication strategies for employees and stakeholders to embrace change
    • consideration of the use of third-party vendors, products, and services
    • piloting of adoption to allow for any need adjustments before broad scale use
    • establishing and monitoring ethical use policies and procedures
    • providing adequate and continual user training to encourage appropriate adoption
  • How will accountability by both the board and management figure into the strategy?
  • What will reporting consist of and how frequently will the board be updated in terms of progress and reliability?

Turning the Focus on Board Readiness

Building technological literacy within the boardroom is not a one-time effort. Rather, it requires an ongoing commitment of directors to remain current on the risks and opportunities arising from rapid technological advancements. Earnest self-evaluation becomes necessary to ensure that the company has board-level competency and the structure within the board that allow for effective exercise of oversight.

To achieve this, several considerations should be discussed and agreed to by the board:

  • Should the expectation be that all directors have technology literacy, much like all directors are expected to be financially literate?
  • Is the organization so dependent on technology or has such significant cyber risk that particular skills and expertise should be included as part of the skills matrix and/or reside in one or more directors?
  • Should the board assess the need for a separate committee of the board, a subcommittee of the board, or an advisory/ad hoc committee to address technologically related issues?
  • Does the board have access to and relationships with appropriate external subject matter expertise that can be leveraged to complement the board’s own knowledge?
  • What are the best ways for directors to receive continual education? For example, attending conferences, specific certification programming, or self-study programs; hosting custom learning events in conjunction with or outside of board meetings, etc.
  • How is the board encouraged/enabled to use various AI tools to safely supplement its own understanding and capabilities?
  • Are third-party applications embedded in board portals properly assessed and vetted before adoption?
  • Is the company, including the board, monitoring regulatory developments in order to weigh in on standard setting and rulemaking that could impact the business?

These are sample factors for companies and their boards to consider when building technology literacy across the organization. Individual circumstances will require adjustment and amendment to this list, but ultimately it is the board’s responsibility to set the tone and tenor for leadership in this area. That begins with having the knowledge needed to make sound decisions and to ask informed questions of management, advisors, and other stakeholders.

Amy Rojik is an experienced national professional practice partner with over 32 years in the accounting and auditing profession with a strong focus on corporate governance, sustainability, financial accounting and reporting continuing education for board of directors and financial executives.