Enterprise agility refers to an organisation’s ability to rapidly adapt to market changes, respond quickly to customer demands, and continuously improve its processes. Adoption can have enterprise-wide consequences, altering the operating model, organisational structure, and governance. Such complex business changes invoke emotional and psychological reactions to the transformation. Corporate governance describes these changes as the most difficult for an organisation to undertake, particularly when they are needed quickly.
What Does Governance Actually Mean?
The term governance refers to various generic regulations and standards, and some industries have specific rules governing enterprise operations. Generic governance includes recommendations from the following:
- In the UK, the Cadbury Report, now superseded by the UK Corporate Governance Code 2024, provides a widely recognised definition of corporate governance, describing it as “the system by which companies are directed and controlled.” This definition emphasises the importance of a framework that balances the interests of various stakeholders, including management, the board of directors, shareholders, and other parties. The new code requires companies to evidence the effectiveness of their internal controls and applies to companies registered in the UK and to listed international companies trading in the UK.
- ISO 37000:2021 outlines several key principles for effective corporate governance. These principles guide organisations in achieving their purpose and responsibly generating value. Governance ensures that all activities and decisions generate long-term value aligned with the organisation’s strategy and purpose. It ensures accountability at all levels and provides effective oversight to maintain alignment with the organisation’s values. ISO 37000:2021 also stipulates that strong leadership fosters a culture of integrity and transparency, engages with stakeholders, and balances diverse interests. Governance should promote sustainability, manage risks effectively, monitor performance to achieve strategic objectives, and maintain transparency to build stakeholder trust and credibility.
- The US-based Institute of Internal Auditors (IIA) articulated the “Three Lines of Defence” model in its position paper, “The Three Lines of Defence in Effective Risk Management and Control.” This model clarifies organisational roles and responsibilities to ensure effective risk management and control. It has been widely adopted and adapted across various industries to enhance risk management practices.
From these sources, one can deduce that corporate governance is of international importance and concern. Therefore, governance implications must be considered when altering the organisational operating model to create enterprise agility.
The Leadership Problem
When considering changes to governance to enhance enterprise agility, it is essential to secure support from the organisation’s senior leadership. However, when specific changes are proposed, the extent and durability of this support may become apparent. Senior leaders may sometimes claim to intellectually understand the requested changes, but raise objections driven by emotion or from a perceived loss of status or reduced accountability.
Some aspects of corporate governance are apparent and straightforward, such as ensuring that an organisation has strong leadership and the necessary controls surrounding market reports and financial statements. However, the challenges lie in the nuances. Does strong leadership imply that teams cannot be self-managing? How much can leaders delegate before breaching appropriate governance?
If an organisation decides to adapt to a market threat or opportunity by organising people around value streams, how are the operational risks managed? Which risk controls need to be modified? Which key risk indicators need to be monitored, and by whom?
AI Makes This Sharper
This question becomes sharper as organisations extend enterprise agility into artificial intelligence. Where a value stream incorporates AI-enabled decisioning — in credit assessment, fraud detection, or customer servicing, for example — the operational risk mapping exercise must be repeated for each affected value stream individually rather than assumed to be covered by a single, organisation-wide control.
Model risk, data lineage, algorithmic bias, and the degree of human oversight retained at each decision point all vary from one value stream to another, and so must the controls and key risk indicators applied to them. Firms making the transition from model risk management to AI governance will need this value-stream-level risk mapping in place well ahead of 2027, so that accountability for each AI-enabled process can be evidenced to the same standard as any other operational risk control.
The Enterprise Agility Governance Framework
The Enterprise Agility Governance Framework connects governance foundations, senior leadership sponsorship, the value-stream operating model, and operational risk oversight — including AI risk mapping — through governance and assurance flows. Governance flows down through sponsorship into value-stream delivery; risk evidence, including AI-specific exposures, flows back up through assurance.
The Challenge for Mature Organisations
In mature organisations, concerns regarding enterprise agility often revolve around the challenges of restructuring, changing, or replacing the status quo with new solutions that may be perceived as untried and untested. Unlike new companies or start-ups, which are typically more flexible and open to innovation, mature organisations may face resistance to change due to established processes, legacy systems, and a culture that favours stability over experimentation.
Enterprise agility in these contexts involves the ability to adapt and continuously improve, yet achieving this agility rapidly requires overcoming significant hurdles:
- Cultural Resistance: Employees and management in mature organisations may resist change, preferring the familiarity of existing processes and systems. Overcoming this resistance requires strong leadership, clear communication, and a compelling vision for the future.
- Legacy Systems: Mature organisations often rely on legacy systems that are deeply integrated into their operations. Replacing or upgrading these systems can take time, be complex and costly, and require careful planning and execution to minimise business disruption. Planning technology changes typically occurs in an IT or Technology investment forum, with data provided by lean portfolio management. If investment is required, business benefits must be quantified to secure funding.
- Risk Aversion: Established companies may be more risk-averse and hesitant to adopt new, untested solutions. Building a culture that encourages calculated risk-taking and innovation is essential for fostering enterprise agility. This hurdle is mainly encountered when altering operational risk controls. These risk controls may have been introduced in the past due to a specific situation or problem encountered. Senior leaders may not be aware of the historical significance of the risk and the controls. Therefore, they are frequently suspicious of proposals to alter or remove such controls to increase agility.
What Mature Organisations Can Do
To address these concerns, mature organisations can adopt several strategies. Leadership commitment is essential for creating enterprise agility, requiring leaders to champion change, establish clear objectives, and implement measures to assess the impact of new working methods. Implementing robust change management practices helps manage the transition, address resistance, and support employees throughout the process.
Organisations can adopt incremental innovation, testing new ideas on a smaller scale before broader implementation, rather than undertaking large-scale overhauls. Engaging stakeholders — including employees, customers, and partners — in the change process helps foster buy-in and ensures that new solutions meet their needs and expectations. Additionally, fostering a culture of continuous learning and improvement encourages employees to acquire new skills and adapt to evolving circumstances.
By addressing these challenges and adopting a proactive approach to change, mature organisations can enhance their enterprise agility and remain competitive in a rapidly evolving market.
For further information regarding enterprise agility and governance, contact Beneficial Consulting.