MFDF Series Dear Board Doc: Should my board consider whether to seek a director with specialized skills, such as AI or cyber expertise?

Q. The investment management landscape is evolving rapidly, with many registered funds turning to alternative strategies and/or beginning to incorporate artificial intelligence.  At the same time, cyber threats and other risks are becoming increasingly complex.  Should my board add specialized expertise to its list of factors to consider when evaluating succession planning?

A. Boards will benefit from conducting an assessment of the expertise, skills, and attributes represented by the existing board and considering whether those are the same skills that the board will need in the future. The board can then identify areas where there may be a lack of depth with respect to future needs. Using a skills matrix to conduct a skills gap analysis could be useful in determining areas that the board may look for in a future member as well as to identify opportunities to seek third-party expertise or director education for the full board or one or more individual directors.

Representation of a variety of skills, experiences, and backgrounds is often desirable for boards. However, board composition also is influenced by factors such as board size and committee structure. When evaluating specialized expertise, the board should consider key man risk and also weigh the value of the specific expertise in the context of the expected tenure of a potential new director. With any recruitment, the board will want to seek candidates whose expertise and knowledge will add value to board discussions regardless of the direction of industry trends.

MFDF’s Creating and Using Skills Matrices report and Visually Mapping Board Composition webinar provide guidance for boards on designing a visual tool to usefully represent the skills, expertise, and attributes that are expected and represented around the board table, or among candidates under consideration.