Directors find regulatory environment “challenging and stressful”, says KPMG’s In the Hot Seat report.
Boards must be prepared to adapt amid heightened regulatory scrutiny, changing stakeholder expectations and the blending of social issues with corporate governance, according to a recent KPMG Australia report, In the Hot Seat: Exploring the evolving role of the board.
Surveying 120 directors in Australia, the report found 68 per cent of respondents regard today’s regulatory environment as “challenging and stressful” since regulatory responsibilities have increased in recent years. It also found 62 per cent of directors think accountability to increasingly broad stakeholder groups is a key challenge — one that has grown the most in recent years.
Caron Sugars, KPMG lead of Board Advisory Services, says that while navigating volatility remains an ongoing challenge for directors, the pressures felt by boards — including a sense of rising personal liability — could negatively impact their capacity to be strategic as stakeholders and shareholders require. Sugars also explains that among directors surveyed, there is a belief that this could affect the attractiveness of ASX boards and result in the desired skills moving towards roles in private companies.
“The world is changing so fast and so much is happening that it’s just expected that executives and board members are going to feel this pressure,” she says. “Every organisation is going to have to adapt in its own way, it’s clear that some sort of evolution will need to happen.”
The report comes amid a growing raft of compliance changes taking shape in Australia. One pivotal moment came in early 2025, when a new mandatory climate reporting regime took effect for larger organisations. Directors are also closely monitoring the rapid evolution of technology-related regulations, which affect a range of issues — cybersecurity, data privacy and the responsible, safe and ethical use of artificial intelligence.
The data also emphasises the importance and necessity of diverse skill sets in the boardroom. The report found 69 per cent of directors surveyed “believed their board and committee members had the necessary skills to ‘a moderate extent’ to navigate technological and regulatory disruption and future trends”. It also found seven per cent of directors didn’t think they had the skills at all, while a quarter believed they did to a “significant extent”.
“It’s not so much that the regulation itself is the issue and the challenge,” says Sugars. “It’s the information that the directors get to be able to then be comfortable around that regulation. Of course, all of that takes time.”
She adds it underscores the value of long-term strategic planning among boards, too. “In the Australian context, tenures and government terms are often in three-year cycles, which tends to focus strategy and thinking around a similar period. But as people are becoming more aware of emerging risks, of these bigger picture-type requirements, we’re starting to see longer-term thinking. We’re also seeing that come into succession planning for boards. It’s one of the reasons we put a report like this out, because we want directors to be taking that step back and going, OK, so what skills will we need in the future?”
This article first appeared under the headline ‘Pressure point’ in the March 2025 issue of Company Director magazine.
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