Since there is not an organisation, in either the public or private sector, whose existence and success does not depend on information technology, it is reasonable for investors and regulators alike to expect that all boards would make it a priority to include a technology-savvy director.

Pervasively, that is often not the case despite history’s lessons.

With Y2K came the first realisation that boards were generally unprepared to anticipate, plan for and avert systemic IT infrastructure risk. I saw that first-hand when I served as special counsel to the Ontario Securities Commission on the legal implications of Y2K for the companies that the OSC regulated.

Soon after Y2K, as legal and audit professionals were still formulating their Y2K “lessons learnt” guidance, the “year of the accounting scandals” (2002) arrived. The broad and instructive inquiries into those scandals threw a very bright light on the inseparable relationship between sound financial management, data integrity and IT governance.

In the years that followed, a great deal of debate ensued about the need for IT business experience to be represented on boards.

From the Ivy Business Journal article (September-October 2004), titled “What Boards Don’t Do But Must Do About Information Technology”, to the 2005 Harvard Business Review article on the need for increased IT governance, titled “IT and the Board of Directors”, it had become clear that boards of directors needed to embrace the fact that their IT infrastructure was a critical dimension of their operations that had previously been overlooked.

The second era of IT governance arrived in the 2010s with the advent of cybercrime, malware, digital sabotage and attacks on businesses of all types.

In 2016, Dambisa Moyo’s Harvard Business Review article, titled “Does Your Board Need A Tech Expert?” reviewed the inherent benefits of IT expertise on the board and concluded, in part, that “… as businesses derive a more direct or significant part of their inherent value from technology, they’ll need access to independent experts (on the board) with deep understanding of technology as a key driver of the company’s fundamental value proposition — people who can check and challenge management’s recommendations”.

It was the paradoxical juxtaposition of companies that had a critical dependence on IT yet had little IT experience on their boards that led securities commissions and other regulators to address that governance deficiency head on.

For example, Britain’s Financial Conduct Authority has called on boards to be far better equipped to oversee IT risk (speech of the FCA’s COO to the 2017 Cyber Security Summit), and the Canadian Securities Administrator’s 2016 Staff Notice 11-332, calls on registrants to manage all forms of IT risk with accountability at the board level.

The Bermuda Monetary Authority has issued similar regulations that require direct board oversight of IT, third-party IT services, data, cyber and related operational risks by the financial service enterprises they regulate.

Over the past few years, IT operations have only become more complicated. Cloud solutions come in many different types and risk profiles, and the contractual requirements for the delivery of software solutions and IT infrastructure “as a service” bears no resemblance to a licence agreement.

The highly beneficial uses of intelligent systems, such as AI, simply increase the stakes of operational risk, and access to data for advanced analytics is now highly encumbered by regulatory restrictions as well as data protection and privacy laws.

Yet many corporate boards still do not have the resident IT business and governance expertise that is commensurate with their enterprise’s reliance on IT to survive and flourish, let alone to better evaluate and oversee transformational IT projects that are undertaken by management.

As well, many risk management board committees have also failed to retain IT business professionals to assist them in their IT oversight functions.

The Corporate Governance Institute’s November 2023 report, “Adapt or Perish: The Technology Challenge for Boards”, concluded with this guidance: “The demands on board members have never been higher. Securing good standards of corporate governance have never been so challenging — including governing technology.”

Does it make sense to have a qualified director on the board who also has technology business experience and expertise? If not now, then when?

First Published in The Royal Gazette, Legally Speaking column, January 2024

Share
X.com LinkedIn Email Save as PDF
More Publications
050-Insolvency-Restructuring-Grid-Image
3 Jul 2025

Insolvency law: secured creditors take note (Bermuda)

The recent judgment delivered by the Supreme Court of Bermuda in the matter of Harold J. Darrell hig...

Appleby-Website-Insurance-and-Reinsurance
2 Jul 2025

Bermuda: Education has helped investors get more comfortable as ILS continues to grow

It’s been an exceptionally busy and record first half of the year for the catastrophe bond sector,...

Appleby-Website-Privacy-and-Data-Protection
25 Jun 2025

Impact of Privacy Law on Bermuda Business

On 1st January 2025, Bermuda’s Personal Information Protection Act 2016 (PIPA) came into full forc...

Appleby-Website-Regulatory-Practice
25 Jun 2025

Simplified Due Diligence in Bermuda

Simplified Due Diligence (SDD) and Reduced Due Diligence (RDD) are critical features of a modern, ri...

Appleby-Website-Employment-and-Immigration
23 Jun 2025

Practical Tips for Conducting Workplace Investigations

Allegations of harassment, bullying or other misconduct in the workplace can create a legal mine fie...

Bermuda-1024x576-1
19 Jun 2025

Bermuda encourages investment with residential certificates

On March 31, 2023, the Bermuda Government replaced its previous tool intended to attract capital to ...

Appleby-Website-Insurance-and-Reinsurance
11 Jun 2025

Bermuda Paves the Way for Captive Insurers with New Stablecoin Policy

The Bermuda Monetary Authority (BMA) has announced a significant new policy framework that allows ca...

Appleby-Website-Insurance-and-Reinsurance
10 Jun 2025

Bermuda benefits from a strong and capital efficient regulatory regime

Bermuda’s long-term reinsurance sector is experiencing a new phase of complexity and scrutiny but ...

050-Insolvency-Restructuring-Grid-Image
9 Jun 2025

Bankruptcy & Restructuring – To Enforce, or not to Enforce

Bermuda’s flagship restructuring process is the appointment of provisional liquidators, whose powe...

ICLG Fintech 21 cover
5 Jun 2025

Digital transformation done right (Bermuda)

As any specialised tech lawyer or technology consultant will tell you, digital transformation projec...