Publications & Resources
November/December 2010
Focus: Technology
Boards of Directors have their Heads in the Cloud
By Marc Daniels
Technological advancements over the past ten years have undoubtedly changed the banking system. One group in particular that has been impacted by technology and the introduction of cloud computing services is the bank’s board of directors. A new breed of tech-savvy directors are doing away with traditional paper books and materials and adopting a cloud computing software model due to its ease of use, flexibility and security.
Board meetings have shifted from conference rooms littered with three-ring binders holding thousands of pages of confidential bank documents to meetings where directors review up-to-the-minute documents on iPads or laptops as they participate in the meetings from across the world. The rapid advances in technology, as well as the global push for businesses to adopt more environmentally friendly practices, has permanently shifted boards away from the traditional paper materials and toward the digital world.
By transitioning their materials and meetings online, directors now have more tools at their disposal to better serve shareholders and clients. The digital world facilitates instantaneous distribution of board and committee materials and searchable archival data, promoting easy collaboration and efficiency. And directors now have access to more advanced security features than ever before. With constantly advancing cloud computing technologies – an entire team of IT professionals are now overseeing the security of the documents, rather than leaving the responsibility in the hands of each individual director.
Cloud-based software (such as the online board portals used by many boards of directors) can be instrumental in decreasing capital expenditures (CapEx) on hardware and software. Instead, banks pay their Software as a Services (SaaS) provider a yearly subscription fee while experiencing minimal IT resource requirements and little to no upfront costs. Other benefits of this approach are low barriers to entry, shared infrastructure and costs, low management overhead, and immediate access to various online applications. In general with SaaS arrangements, users can terminate the contract at yearly renewal dates, thereby avoiding return on investment risk and uncertainty.
In the past the majority of bank boards were reluctant to embrace cloud technology, even as banks have shifted different components of their business into the cloud. Bank chairmen, executives and board members have shied away from the cloud, either out of concerns about the robustness of its security or simply because of a comfort level with traditional paper books and materials.
However, many financial institutions are bucking the trend and insisting that their boards operate in the cloud. There is a growing recognition amongst chairmen and board members that the traditional way of managing meeting materials is outmoded and inefficient. Security concerns once associated with cloud computing have been rendered obsolete, clearing way for increasing numbers of the more progressive banks to harness its potential. Even the most traditional of board members, those who still prefer old-fashioned paper board books, appreciate having access to material from any computer wherever they are in the world. Additional features often include keyword-searchable archives, the ability to sign a resolution or fill out a D&O questionnaire while on the go.
Product advances will also serve as a catalyst to drive more boards into the clouds. The Apple iPad is just one such device, and with more than 3 million units sold in just the first four months of release, the iPad is beginning to make its way into the board room. Its low cost, easy-to-use interface combined with an extended battery life, 3G and Wi-Fi access make the iPad ideal for the director on the go.
The banking industry is experiencing same kind of transition that took place within the law profession when the personal computer went from a luxury to a requirement for competitive firms. Initially, lawyers rejected the shift, preferring to draft briefs and motions by hand. Now it’s very unusual to find a lawyer who is not using software to manage their mark-ups. Just as it is difficult to imagine a lawyer joining a company today that didn’t have any software, banks are moving in the same direction when it comes to cloud computing in the form of board portals. Within a few years, any director joining a bank board will be expecting their board material to be available in the cloud.
Marc Daniels is executive vice president of licensing at Diligent Board Member Services (www.boardbooks.com) in New York and can be reached at 973-939-9406 or marc@boardbooks.com. Diligent Boardbooks is a WIB-endorsed Value & Income Program partner (VIP).
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