Adept risk management and diverse leadership go hand in hand. Not
only do corporate leaders manage known risks, they also prepare, to the
extent possible, for unforeseen or hard-to-predict market conditions — or
VUCA. Coined by the U.S. military, VUCA stands for volatility, uncertainty,
complexity and ambiguity. Failure to respond creatively to VUCA conditions
is one of the biggest risks faced by board members and C-suite executives.
The global pandemic classically exemplifies a VUCA condition. Causing
tragic loss of human life and widespread pain and suffering, not to mention
fundamental economic disruption, the pandemic encouraged corporate
leaders to re-examine the robustness of their business processes. This stress
test can, in turn, lead to innovation.
And this is where diversity and inclusion come in. The VUCA conditions
created by the pandemic, combined with the shock waves caused by the
murder of George Floyd, have forced corporate leaders to face their busi-
ness models and the persistent effects of social imbalance at the same time.
In rising to this challenge, companies with diverse leadership teams have
enjoyed a natural advantage. Why? Social diversity in the boardroom and C-suite encourages decision makers to innovate. In her article, “How Diver-
Katherine Phillips, explains that: “When group members notice that they are socially different from one another, they … assume they will need to work harder to come to a consensus, and the hard work can lead to better outcomes.” Put simply, Philips states, “Diversity jolts us into cognitive action in ways that homogeneity simply does not.”
And it is no accident that the NASDAQ agrees. Home to some of the
world’s most innovative companies in the world, NASDAQ has proposed and
the SEC has approved a requirement that certain listed companies have at
least two diverse directors, including at least one woman and one member
of an underrepresented minority or the LGBTQ+ community, or explain
their non-compliance in a public disclosure.
At the same time, corporate boards around the world are expanding the field of viable board candidates beyond those with traditional CEO/CFO backgrounds. Now, more and more, candidates with risk, operations, marketing, HR, and law and regulatory backgrounds are getting their due consideration. Everything else held equal, this increased diversity will enable leaders to respond more resourcefully to VUCA circumstances. This wider tent is also creating a more socially diverse talent pool for corporate boards. All this to say: The more inclusive we are in the corporate suites of today, the more inventive we will be in facing the inevitable crises of tomorrow.
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inevitable crises of tomorrow.