Strengthening board engagement as volatility tests strategy

Disruption and uncertainty have become the new normal for companies. Setting a five-year strategic plan and revisiting it annually now seems like a quaint concept. Against this backdrop, our conversations with seasoned directors throughout the year have emphasized the need for more dynamic, real-time board engagement in strategy. In particular, boards are focusing on strategy execution, artificial intelligence, and the geopolitical and macroeconomic landscape.

Volatility—from geopolitics to cyber risks to AI—threatens to make long-term strategy challenging without vigilant checks on execution. Boards can help link strategy and risk; challenge assumptions; monitor key performance indicators, key risk indicators, and key control indicators; encourage pivots when needed; and bridge strategy gaps that management might be missing. While the long-term strategy sets the direction, strategic execution helps ensure the organization’s survival and continued value creation in the face of real-time shocks.

Agile strategy

Directors are increasingly expected to test underlying assumptions and help ensure that strategy is anchored in a clear articulation of risk appetite. While scenario planning is important to stress-test the long-term strategy, many directors see challenges with traditional scenario planning. In the past, companies may have identified two or three key uncertainties, and management and the board constructed three or four plausible scenarios to address them. Today, however, most organizations face so many consequential uncertainties that a traditional scenario-planning matrix cannot address them all.

Scenario planning is essential to help expand leadership thinking about strategy and to build the cognitive muscle to respond to change. But given its limitations, companies and boards are placing more emphasis on resilience, agility, and adaptability as core competencies around strategy execution. They enable management to adjust strategic execution without the need to revisit the long-term strategy.

Responding to shifts

As discussed in Assessing the Company’s Adaptability: Questions for Boards, our tool in the 2026 NACD Blue Ribbon Commission report, agility and adaptability are not simply a reaction to disruption. They reflect an organization’s ability to learn continuously; make timely decisions amid uncertainty and volatility; and redeploy capital, talent, and leadership ahead of competitors.

Of course, judgment is required when deciding whether a change in the external environment warrants revisiting the company’s long-term strategy, rather than just adapting its execution. That judgment and the ability to bring the board along, which is increasingly a core leadership competency for the CEO, will become more challenging given the uncertainties posed by AI and macroeconomic and geopolitical risks.

AI. This is top of mind in most boardrooms, as AI is a transformational shift that will fundamentally reshape operating models, decision-making processes, and competitive dynamics across industries. It requires boards to oversee how AI is embedded into a company’s broader strategy and translated into concrete initiatives. It also requires boards to help ensure that companies proactively adapt their strategies, governance frameworks, and talent capabilities to remain competitive and resilient.

That said, outside of the technology companies that are investing billions of dollars in AI, directors should be wary of allowing AI to unduly dominate strategy discussions, which should continue to focus on the “business of the business”: How is management defining markets and finding competitive advantage in pursuit of growth and long-term value creation?

Top of mind for many directors are culture, workforce, talent, and people issues. Achieving the benefits of generative AI (GenAI) and agentic AI at scale hinges on placing people at the core of adoption. Companies should prioritize change management, workforce empowerment, skills development, and cultural transformation.

What skills are necessary in an agentic AI and GenAI world? How does the company mitigate the risk of “de-skilling”? Fundamentally changing what people do every day and how they work requires leadership.

Second, directors are focusing on how AI can enable strategic execution and enhance productivity, efficiency, and decision quality in areas such as sales, workflow design, customer service, supply chain optimization, product innovation, workforce management, and research and development.

Other key boardroom considerations include:

• Whether AI investments are aligned with strategic priorities and whether the company has the data infrastructure and talent to operationalize these investments
• The need for an AI capital allocation framework to help assess potentially very different risk-return profiles for different types of AI investments
• The adequacy of the company’s AI governance processes and guardrails
• Whether the company’s cybersecurity defenses and incident response plan keep pace with the growing sophistication of cyberthreats posed by AI

Given the increasing importance and complexity of AI, as well as the speed of AI advancements, ongoing board education on AI remains essential. This may include reports from management, outside education programs, and updates from third parties.

Macroeconomic and geopolitical risks. Macroeconomic volatility and geopolitical fragmentation are becoming central to strategic oversight. Geopolitical risk is reshaping decisions about market entry, supply chain configuration, and technology investments. Boards are becoming more engaged in evaluating concentration risks, regulatory divergence across jurisdictions, and the potential for sudden policy shifts.

At the same time, boards should monitor evolving economic and geoeconomic risks. For example, the prolonged period of near-zero interest rates during the COVID-19 pandemic obscured weak strategic decisions by making capital unusually cheap. Now, with interest rates significantly higher, the cost of capital is forcing companies to be more selective about where they invest.

For decades, US markets have benefited from an implicit premium tied to strong rule of law and institutional stability. That assumption is now being reassessed. As a result, some European and Asian companies are diversifying away from US-based financial infrastructure and increasingly pricing political risk into US assets.

These shifts carry several important strategic implications for the board’s consideration:

• Supply chains are now a core strategic asset. Many companies are prioritizing “friend-shoring” and near-shoring to build resilience, even though this increases costs.
• Balance sheet discipline has returned. Levels of leverage that seemed acceptable in recent years appear risky in a higher interest rate environment.
• Geographic investment decisions require a geopolitical lens. Companies should evaluate geopolitical alignment risks across markets when making capital allocation decisions.
• Speed has become a competitive advantage. Organizations that can move quickly, including on acquisitions, pricing, or market entry, are better positioned to capitalize on narrow windows of opportunity.
• Clear stakeholder communication is critical. Companies should articulate how leadership is navigating uncertainty, offering a credible and human narrative without overstating confidence.

To help put the board’s assessment of strategy into context, it can be helpful to review the company’s historic total shareholder return for the past 1, 3, 5, and 10 years. This can show whether the firm is lagging relative to competitors. Is the company leaving value on the table in terms of cost, capital allocation discipline, or margin structure? Dynamic engagement by the board will be key to effectively calibrating strategy in a low-visibility, high-volatility environment.

This article originally appeared in NACD Directorship Magazine.