Directors Must Grow Their Knowledge of Blockchain
Current board understanding of the technology is woefully low.
On a scale of 1 to 10, directors’ understanding of blockchain rates at a 4.
That is just one finding of Blockchain Digital Assets: Fad Disruption or Strategic Driver?, a report developed by Diligent and Silicon Valley Directors' Exchange to gauge directors’ knowledge and understanding of blockchain technology and developments.
The report, which surveyed over 200 corporate leaders, also found 56% of the survey participants getting information on blockchain digital assets from their own independent research and 74% of respondents believing that regulation of cryptocurrency by the SEC and similar bodies will increase over the next two years.
Boards Must Increase Blockchain Knowledge
Lisa Edwards, president and chief operating officer of Diligent Corporation, believes it is vital for boards to bolster their knowledge of blockchain digital assets, including cryptocurrencies and non-fungible tokens (NFTs).
“It’s important for boards of directors to be up to speed on new technologies, on things that can show up on corporate risk registers, on things that can ultimately be an asset to companies in some of the ways that basic blockchain technologies can,” says Edwards. “There’s a basic need for boards to be aware enough to be asking the right questions and understanding trends around technologies.”
How Boards Get Information on Blockchain
As for the gathering of that information, the report found over half of directors performing independent research. Third-party experts and consultants were the method of choice for 54% of directors, with 24% leaning on a chief information officer and 11% learning what they need to know from their CEO.
The survey found that there are still doubters when it came to whether understanding of blockchain is relevant to business strategy. Just 40% of directors “agreed” or “strongly agreed” that blockchain digital assets would be “important to my company’s global competitiveness in the future.”
“I think a lot of boards probably don’t feel it’s relevant because the primary usage is Bitcoin and the somewhat speculative nature of Bitcoin has scared a lot of people off,” Edwards says. “Blockchain has a lot of other use cases and the data is still coming to light for boards of directors.”
Fear of Regulatory Action
Another factor that could be causing directors to be weary of blockchain: possible regulatory action. Nearly three-quarters of respondents believe regulation of cryptocurrency and other blockchain digital assets will be ramped up between now and 2024. While directors think regulation of blockchain will be stepped up, they do not believe the increased attention will result in damage to global competitiveness, with just 27% of respondents registering concern in that area.
Knowledge Is Key to Asking Questions
To Edwards, immediate board priorities should include learning enough about blockchain to be able to ask the right questions and monitor risks around the technology.
“Boards have to be able to see if blockchain is appearing on a company’s risk register. They should know how blockchain could improve business processes, even if they’re not using it today. Expertise needs in the boardroom are evolving, and we’re seeing more emphasis on nontraditional backgrounds. Boards must be sensitive to and aware of emerging technologies.”