The 21st century is replete with some of the most revolutionary technological advancements. Blockchain, AI, IoT, and other sophisticated technologies are emerging and progressing into the business world.
Credit to these technologies, the world around us is changing rapidly. If you follow the business world closely, you must have observed that some of the most successful companies are the ones that keep modifying their models to keep pace with technological advances. These companies update their processes and structure by integrating cutting-edge technologies.
New technologies help companies in many ways. It boosts their efficiency, automates processes, and reduces errors. Moreover, it enhances their performance, productivity, and revenue.
While technological integrations in businesses seem beneficial, their maintenance is also crucial. Ineffective technical utilization in companies can lead to significant financial loss.
So, who manages technologies and their proper implementation in the company?
The board of directors appoints a technology committee that oversees appropriate technologies’ proper utilization and implementation.
This article focuses on the roles and responsibilities of the technology committee. We will also focus on the committee’s key areas, authority, and purpose.
What is a Technology Committee?
Twenty years ago, technology committees did not exist, and boards did not consider establishing a technology committee. The reason might be related to slow technological advancements or the board did not believe the oversight of technology was an essential area requiring board attention and supervision. Company operations and our lives were running smoothly with little involvement of any sophisticated technologies.
However, times have changed. Today if the company is not technologically sound, it will be left behind as its competitors adopt advanced technologies to enhance efficiency.
Today, the emergence or what you can call the need for a technology committee is due to the following reasons:
- Rapid technology developments
- Increasing adoption of technology in corporate
- Demand to cater to a global audience
- Need to communicate with business partners and customers globally
- Competitive need to boost business efficiency and revenue
Today, many companies still have not established board technology committees, but the percentage is increasing, especially among financial firms.
The board of directors appoints the technology committee. The purpose of the technology committee is to assist the board in overseeing the company’s technical needs, including digital transformation.
The technology committee monitors technology implementation, utilization, investment, strategy planning, performance, and trends.
In simple words, the responsibility of the technology committee is to help board members understand the latest technological trends in the industry and give insights into them. Further, the committee also identifies and analyses how technology can boost the company’s performance.
- The technology committee typically consists of three board members.
- The board appoints the technology committee members either directly or at the recommendation of a Governance & Sustainability Committee.
- The board also appoints one member who will head the technology committee.
- The technology committee will function or serve the board per the terms laid down by the board.
The structure of the technology committee, its duties, roles, and responsibilities may vary depending on the company. However, its importance is undeniable in both technical and non-technical companies.
Duties of the Technology Committee
- The committee must convene regular meetings at least four times yearly and provide regular reports to the board. The meetings will include participants determined by the committee and will be scheduled for appropriate duration and time to fulfill their responsibilities effectively. The Chief Operating Officer, Chief Risk Officer, and Chief Audit Officer will generally attend the committee’s quarterly meetings.
- As necessary and appropriate, the committee will hold separate executive sessions with management, including the Chief Operating Officer and Chief Risk Officer.
- As needed, the committee will receive information between formal and informal meetings and briefings with management, including the Chief Operating Officer and Chief Risk Officer. Depending on the circumstances, these interactions may be facilitated by the Committee Chair or individual Committee members.
- The committee has the authority to establish subcommittees and delegate any or all of its responsibilities. It may also establish rules necessary or appropriate for conducting its business.
- The committee is entitled to direct access to the company’s management, including the Chief Operating Officer and Chief Risk Officer, ensuring open and transparent communication. It may seek advice and assistance from internal legal or other advisors and retain external legal or other advisors.
- As determined by the committee, the company will provide adequate funding to cover necessary administrative expenses and compensation for legal and other advisors retained by the committee.
- The committee is responsible for conducting an annual review and assessment of its performance and reporting the results to the board.
- The committee will review and evaluate the adequacy of this charter annually and may recommend changes to the charter to the board if necessary.
Roles & Responsibilities Of the Technology Committee
The roles and responsibilities of the technology committee depend on the company and its board. However, here are a few common and vital roles of the technology committee.
- Receive reports on the latest technological trends in the market.
- Receive and review reports from management on the effects of technology on the performance and the company’s strategy.
- Analyze reports from the management on technology investments and metrics.
- Review the company’s technology investment and tech strategy planning per the annual budget.
- Receive, analyze, and compile reports from the management regarding the company’s technology spending and strategy to present to the board members.
- Suggest technology modifications in the business model for the company’s benefit.
- Review and approve the company’s technological policies.
- Receive reports for analysis from the Chief Audit Officer related to the company’s operations and technology assessment results. The committee head will present the same report to the board members.
- Review the quarterly metrics related to the company’s operations and technology risks that have threatened the business, from security issues to data privacy, cyber security, fraud, and more.
- Monitor management’s steps to resolve and prevent such risks and safeguard the business’s resilience.
- Receive regular reports from the management regarding the company’s risk management strategy, risk assessment guidelines, and technology risk metrics.
- Obtain recommendations from the management on operational risk tolerance measures and technology implementation.
- Review and suggest changes or updates in the company’s risk tolerance guidelines and limits.
- Ensure the proper implementation and execution of the risk management strategies in the company at every level.
- Review reports and guidelines of regulatory bodies and inform the management of the same that affects the company policies.
- Coordinate with the management and board members to ensure they have the required reports, data, and information to take action on the company’s policies, risk management, and technology strategies.
Charter Of Technology Committee
The charters for the technology committees of publically listed companies can often be found online. These committees are responsible for a wide range of duties, which can be grouped into 12 key areas:
- Trends: Monitoring and staying informed about the latest technological trends and advancements relevant to the company’s industry.
- Budget and Investment: Overseeing the allocation of resources and making informed decisions regarding technology-related investments.
- M&A: Providing guidance and expertise during mergers and acquisitions involving technology assets or companies.
- Security: Ensuring the implementation of robust security measures to protect the company’s technology infrastructure and data.
- Review, Assess, and Evaluate: Conduct thorough reviews, assessments, and evaluations of existing technology systems, processes, and strategies.
- Recommend: Providing recommendations and insights on technology-related matters to the board of directors and executive leadership.
- R&D Performance: Monitoring and evaluating the performance of the company’s research and development initiatives.
- Human Capital/Workforce: Assessing the technology workforce’s skills, capabilities, and capacity and making recommendations for talent development and acquisition.
- Quality and Safety: Ensuring that technology systems and products meet high quality and safety standards.
- Technology Competitiveness: Evaluating the company’s technology position relative to competitors and identifying strategies to enhance competitiveness.
- IP Portfolio: Managing and protecting the company’s intellectual property assets, including patents, trademarks, and copyrights.
- Interface With Risk/Audit Committees: Collaborating and coordinating with the risk and audit committees to address technology-related risks and compliance matters.
These focus areas reflect the critical role of technology committees in guiding and overseeing the company’s technology-related strategies, investments, and operations.
Key Authority Areas Of Technology Committee
Critical Areas for a Technology Committee’s Role in Fulfilling Monitoring and Supervisory Responsibilities
A. Staying Abreast of Technological Developments
A Technology Committee plays a crucial role in evaluating the impact of new essential technologies and emerging concepts on the corporation’s strategic, high-level, and long-term perspective. The evaluation includes assessing technologies beyond the in-house technology staff’s immediate operational and product development focus. The committee benefits from a mix of senior in-house technologists and external experts who provide a broader perspective and unbiased assessment of the corporation’s technology landscape.
B. Addressing Security Threats
With the increasing reliance on the public Internet and wireless access, companies face significant challenges related to security. A Technology Committee is responsible for understanding and advising on issues such as improving security technology, creating backup communication networks, and mitigating risks associated with cybercrime, hacking, and data breaches. This oversight ensures management’s policies and practices align with the corporation’s readiness and spending on security measures, software, and hardware.
C. Advising on Strategic Investments in Science and Technology
Technology projects are often substantial investments for companies and require careful management. A Technology Committee, particularly one with financially savvy directors, assists in aligning technology initiatives with corporate strategies, assigning strategic value to projects, and enforcing budgetary guidelines. This approach treats science and technology projects as financial assets, promoting financial discipline and prioritization. By involving the committee in project selection, the organization benefits from improved decision-making and more significant support for strategic goals.
D. Evaluating Technological Position in a Competitive Environment
A Technology Committee, comprising a combination of senior in-house technologists and external authorities, evaluates the corporation’s competitive standing from a technology perspective. It assesses whether the company’s products lead the market in terms of technology or other competitive advantages. The committee also ensures product development aligns with industry trends and changing market requirements, helping the corporation maintain a strong position within its industry.
E. Managing Technology Acquisitions and Collaborations
A Technology Committee, leveraging its technical expertise, business acumen, and industry relationships, supports management in identifying, assessing, protecting, and leveraging intellectual property assets. The committee’s involvement in activities such as acquiring technology licenses, forming strategic alliances, and participating in mergers and acquisitions enhances the company’s product pipeline and aligns with its strategic direction. Additionally, the committee evaluates the commercial prospects and risks associated with specific technology acquisition opportunities.
F. Identifying and Developing Technology Leadership
The Technology Committee assumes responsibility for evaluating the performance of the company’s chief technology officer and developing succession plans for this role. Recognizing technology executives’ critical knowledge and expertise, the committee establishes procedures and policies to ensure knowledge transfer, effective delegation, and seamless transitions in case of personnel changes.
G. Safeguarding Intellectual Property
A Technology Committee is vital in developing strategies and priorities for protecting the corporation’s intellectual property. This responsibility is particularly significant for technology-based businesses. The committee reviews patentable technologies, assesses their fit within the corporation’s strategic direction, and recommends the ones worthy of patenting. Working closely with corporate counsel, the committee ensures adequate protection of the corporation’s intellectual property.
H. Guiding Data Retention, Privacy, and Regulatory Compliance
The Technology Committee develops and monitors guidelines and procedures for legally-mandated data retention, recordkeeping, and compliance programs. It collaborates with internal and external legal and accounting professionals to define appropriate policies. Furthermore, the committee actively participates in setting and monitoring the corporation’s privacy policy, covering internal data management and customer data collection, use, and sharing. This commitment goes beyond status reports and requires the committee’s active involvement.
Conclusion
In conclusion, a Technology Committee assists the board of directors their monitoring and supervisory responsibilities in critical areas. By staying abreast of technological developments, understanding security threats, advising on strategic investments, evaluating competitive positioning, managing technology acquisitions, developing technology leadership, protecting intellectual property, and guiding data retention and privacy, the committee ensures that the corporation remains innovative, secure, and compliant. With a diverse composition of technologists and external experts, the committee brings a broad perspective and financial discipline to technology-related decision-making. By actively engaging in these areas, the Technology Committee helps the organization navigate the complex and ever-changing technology landscape, driving long-term success and ensuring a competitive edge in the marketplace.