The top 5 topics of boards of directors with Prof. Dr. Sven Hayn

Prof. Dr. Sven Hayn
Prof. Sven Hayn
Podcast “The Agenda”

This season, on The Agenda podcast, we’re driving straight to the heart of corporate governance, addressing issues ranging from sustainability to cutting-edge technology. Follow this unique series of conversations hosted by Ingo Notthoff.

 In this podcast episode you will hear:

Prof. Dr. Sven Hayn is a chartered accountant, consultant at board and supervisory board level and professor at the University of Hamburg. He has over 30 years of professional experience in international accounting, sustainability reporting, auditing, risk management, and corporate governance. With podcast host Ingo Notthoff, he discusses the five most important topics on the agenda of boards, why companies need to plan risk management, what damage hackers can cause — and why the EU’s sustainability reporting directive should be viewed as an opportunity. 

Here are the key questions answered in this episode: 

  • What is currently of most concern to management and supervisory boards?
  • What does a good risk management plan look like?
  • What does the geopolitical situation mean for globally active companies?
  • Why is sustainability reporting an opportunity?
  • How can companies proactively build and secure talent?

*Please note: The podcast episode is available in German

Episode highlights

Ingo Notthoff: Sven, we got down to business relatively quickly in the preliminary discussion. We have a lot to talk about today. I'd say we should get straight to the point. From your point of view, what are the biggest concerns for boards at the moment?

Prof. Dr. Sven Hayn: Ingo, that's an excellent question. The topics haven't changed that much in recent years. However, the weighting is different. If you pick out three areas, which then lead on to the top topics, there is geopolitics on the one hand, the topic of sustainability in all its facets and then, and I am deliberately linking this, artificial intelligence and digitalisation, because these two topics are really clearly intertwined. [...] The topic of transformation goes hand in hand with all three. And all three must also be considered in the area of risk management. Of course, other sub-topics include the shortage of skilled labour [...] and supply chains. These are the top 5 issues on the agenda. 

Ingo Notthoff: What can boards do specifically to get to grips with these challenges? 

Prof. Dr. Sven Hayn: To be honest, the answer is classic risk management and good corporate governance. This applies to the Management Board and the Supervisory Board, and of course also to the Administrative Board. It's about observing and analysing trends and understanding them as well as possible. We must also not forget that 2024 is a so-called “super election year”. Over 50 per cent of the world's population will go to the polls this year. This creates uncertainty. [...] The question now is what this means for my company, for my business model, for my future viability. 

And that brings me to something that I consider to be extremely important, which I like to call ‘thinking in scenarios’. This means thinking through and prioritising these scenarios, describing them, analysing them and always having a well-prepared plan B.

Ingo Notthoff: What are the current top risks for companies? 

Prof. Dr. Sven Hayn: These are geopolitical challenges on the one hand, economic and regulatory challenges, i.e. risks arising from energy prices, inflation, but also from new bureaucratic requirements. There are risks resulting from a shortage of skilled labour and, of course, the issue of cybercrime. 

What is really new and special about these years is that we have all of these so-called multi-crises in parallel and that they all have an impact on companies. So the question is, “how do I deal with them? How can I anticipate such risks?” And the important thing, and this really is an expression of modern corporate management, is not to react frantically and retrospectively to something after it has already occurred, but to be as well-prepared as possible in advance. This means really understanding risk management as an integral part of corporate management and also having this Plan B as part of this parallel challenge. This also includes the topics of change and transformation. 

Ingo Notthoff: How can I as a company reasonably assess an entrepreneurial risk? 

Prof. Dr. Sven Hayn: I draw up a risk inventory by looking at the risks that are relevant to my company. The size of the company is important, the sector is important, how I am financed and which markets I supply is important. And that's why there's no one-size-fits-all approach, it really has to be customised. I ask myself the question, “am I properly equipped in terms of personnel and time to be able to address these risks?” And then I come to an issue that is really important to me, which is also very, very important to me at Management Board and Supervisory Board level: taking the issues seriously without ‘hyperventilating’ at the same time, without exaggerating. 

Ingo Notthoff: What should risk management look like?

Prof. Dr. Sven Hayn: I start with a risk inventory, look at the individual risks, assess them and prioritise them. Do I have the right skills and the right knowledge in the company to be able to address these risks? For example, if I realise that cybersecurity is a key issue for me, but I don't have an expert in the company who is familiar with it, then I have a gap to fill. I ask myself as part of my internal control system, do I have controls? Are they effective, do they work? I carry out control tests. [...] 

I like to see two perspectives. In addition to the question of whether I am properly staffed and equipped in terms of time, there is also the question of how the individual risks that I have identified affect me as a company. The so-called “outs” from outside the company. How do I deal with them as a company and how do I affect my customers, employees, markets, products, shareholders, financing, etc. from the inside-out? At this point, you always need both points of view, both perspectives and always have a plan B ready in the drawer. 

Companies that only see ESG as a marketing gimmick and don't think ahead may simply disappear from the market because customers, employees and financiers run away. We won't see that tomorrow, but it's a trend that could become very real the day after tomorrow.

Ingo Notthoff: Let's move on to the topic of ESG. How do you personally view mandatory reporting in the areas of environmental, social, and governance? 

Prof. Dr. Sven Hayn: I think it's the right way to go, and honestly the only right way. Until now, we have focussed very strongly on the world of figures, on financial reporting. We have relied very heavily on rating agencies and analysts. But what will be important in the future for the management of a company, what is important for a change in behaviour, are precisely these three topics of environment, social affairs and corporate governance, in other words E, S and G.

But let's be honest, why should companies see reporting as an opportunity? I often hear this point of criticism, and I understand it when I look at this overabundance of regulations. And I understand that companies are frustrated and say, “What's in store for me to fulfil these reporting obligations?” [...] Let's take a virtual step back together and think about what these thought-provoking impulses are actually supposed to trigger.  

I set myself the goal of reducing CO2 emissions by such and such a percentage in five, ten, or 15 years. Then I automatically ask myself, “what I need to change in my company? What do I need to change in my products? What do I need to change in my services?” Or in other words: Am I actually sustainable and viable as a company in the long term? [...] And if we then take responsibility again as fellow inhabitants of this earth, then we must initiate this change in behaviour. Otherwise, we can really leave little behind for future generations.

Ingo Notthoff: Reporting is one thing, but what role does sustainability play, especially for customers and — you just mentioned employees — especially in the battle for the best talent?

Prof. Dr. Sven Hayn: We see this very, very clearly among employees, who pay attention to whether the company is behaving properly. That's why I think this idea of ESG, in the sense of sustainability, is so incredibly important. Environment, Social and Governance, which also includes the questions: How do I treat employees differently? Do I have D&I criteria? Does everyone have the same opportunities, not just in terms of gender, but also in terms of ethics? Do I have proper corporate governance, proper company management? Do I play by the rules of the game? Do I fulfil my responsibilities in the social, sustainable and ecological areas? [...]

Employees ask themselves: Who do I want to work for? We compete in this market.  For customers, this process is slower and not yet intensive enough. When I look at the textile industry, I still look for the cheapest T-shirt and not necessarily the one that has been produced most ethically and fairly. But here, too, I expect to see a significant change in behaviour in the future. And then the following could happen: Companies that see the whole thing as a marketing stunt and don't think ahead may simply disappear from the market because customers, employees, and financiers will run away. We won't see that tomorrow, but it's a trend that could become very real the day after tomorrow. 

Ingo Notthoff: What can I do as a company to attract new talent and retain them in the long term? 

Prof. Dr. Sven Hayn: On the one hand, there is cooperation with universities and other training professions. In my opinion, approaching people in schools helps enormously to encourage loyalty to the company at an early stage. When I start an apprenticeship, when I start a degree programme, when I start my first job, I want to have a clear plan of where it will all lead in the long term. The employee, the talent, asks themselves: Do I want to work for this company? That brings me back to corporate culture, to purpose, to all the topics we mentioned earlier. 

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Prof. Dr. Sven Hayn
About the author
Prof Dr Sven Hayn is a chartered accountant, consultant at board and supervisory board level and professor at the University of Hamburg. He has over 30 years of professional experience in international accounting, sustainability reporting, auditing, risk management and corporate governance.