Advanced Corporate Governance

The Impact of Digital Governance application

on
The BOD role to maximize company profits in Egyptian market

1. Abstract

The world is turning to data and AI driven decision making as it enables the Board
of directors and business leaders in all industries to achieve sustainability, growth
and competitiveness.
Especially In a market with more offerings than ever before, coupled by fierce
competition, Board members and decision makers need faster and better-informed
decisions in many aspects of the business.
Consequently, Leading Business Organizations Are Looking in to Becoming Data
and AI Driven Organizations
Having the digital IQ in their Board members, practices, initiatives, strategies &
decisions
As it enabling the right people to have the right insight in the right time in the right
format on the other hand

Purpose – This paper aims to investigate the role of dynamic capabilities of the
Board of directors in the 4th industrial revolution and Data economy era enabling
the digital governance applications and explores the relationship between data
driven transformation strategies and related success elements on the quality of
BOD roles

Design/methodology/approach – In this study, we will use a mixed methods

approach quantitative & qualitative researches including numeric data coming from
financial statements and financial performance indicators and other non-numeric
data coming from surveys, interviews and assessments

Originality/value – This study highlights the relationship between optimizing digital

governance applications and organizational performance resulted from BOD
oversight role
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Keywords Digitalization, Digital Governance, Data driven transformation, data

practices, advanced data analytics, data products data asset, actionable insights,
Data driven decision making
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2. Literature Review

Changes of business dynamics impacted from 4IR will be more radical than the
public can realize, which is foreshadowed by the fact that digitalization,
referred to as “the integration of digital technologies into everyday life” has
shown to have tremendous impact, significantly changing societal and
organizational behavior
Bankewitz1, Åberg & Teuchert1 (2016)

More precisely, it has radically transformed how humans and businesses

communicate, collaborate and make strategies, In the light of these
developments, researchers need to establish thorough understanding of how
digitalization will impact Board of directors’ practices, one specific strategic
decision-making group where it is particularly relevant to be considered and
discuss the shit of strategic conditions as of digitalization is the board of director
(Åberg, Kazemargi & Bankewitz (2017)

Considering the complexity and dynamics that firms are facing in a digital era, it
is no exaggeration to argue that the way boards of directors contribute to
strategy needs some new perspectives.
In this paper, we reconsider some of the commonly used notions and
assumptions of board strategizing.
We conceptualize a framework for board strategizing by revisiting and
providing novel elements to the work introduced in 1999 and how to align the
success elements of data driven transformation
McNulty,Pettigrew (1999)

This demonstrates the need for organizations to react to the threats and
opportunities of the changing context in order to maintain or strengthen their
sustained competitive advantage.
The potential impact of these emerging threats and opportunities is perfectly
illustrated by John Chambers, the Chairman of Cisco (McKinsey, 2016).
Bankewitz1, Åberg & Teuchert1 (2016)

Recently in research regarding digital governance, the failure of traditional

corporate governance mechanisms and lower attention to digital governance
practices is demonstrated by the extraordinary sequence of business scandals
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that have affected the global economy over the past 30 years and, finally, the
recent global financial crisis.
These events have shown the inadequacy of governance processes and
especially control in the prevention of fraud and accounting offenses and in the
most complex enterprise risk management (ERM) activities in general. This has
led scholars to reflect on the importance of digital governance formworks and
to help in researching the best management models.
In this regard one of the main enablers to achieve the data driven
transformation strategies is the optimization of Digital Governance
applications, Digital governance is a system that helps to establish lines of
accountability, roles and decision-making authority for the digital presence and
digital existence for any organization. Digital governance entails the rules,
processes, values, infrastructure and support that mold how digital tools and
services help to create value for the business. Digital governance also includes
a set of guiding principles and performance objectives.
Eisenstein, (2015)

Digitalization refers to concepts such as the availability of large amounts of

data (big data), increased (algorithm-driven) analytical and processing
capabilities, and crowd/sensor approaches through which information flows
increase.
The growing momentum of the digitalization is impacting society and
organizations and therefore constantly changes the strategic context of
organizations in which the impact digitalization may have is shown by a
statement of a banking CEO that “the industry is in the midst of a transition that
occurs once every 100 years”
Hirt, Willmott (2014).

Governing the digital existence of the organization include the building and
safeguarding of the most valuable asset of any organization which is the data
asset to whatever the business sector through systematic approach of digital
transformation business process automation, digitalizing the responsibility and
accountability of all operations, risk management, performance management
and optimizing the data driven decision-making process and building strong
Data & information governance frame-work to guarantee the data
Governing the Digital presence tools include setting policies, procedures,
charters controlling and assigning the responsibilities and accountabilities to
work on all digital presence channels of the organization including websites,
mobile sites, social media outlets, the internet of products & services, building
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and managing communities that are promoted on the internet.Company’s digital

policy should cover the acceptable standards for what the company allows and
disallows on the internet and with respect to internet-based activities. A digital
governance policy is a set of written statements that guide how to manage
risks and ensure that those involved in digital processes don’t deviate from the
company’s mission or other core values related to the organization’s online
presence. A digital policy also sets the standards for the nature of the
company’s online presence, including digital quality and effectiveness.
Saiyara (2019)

Data driven decision making will have a significant role in the corporate
strategy, determining the company strategy and setting the assuming time to
market, speed of competitive response, and superior customer service drive a
successful corporate strategy
While one of the Most important roles of the BOD is the Value creation and
collaborative partnerships
here is the role of Digital governance to control the formulation and
implementation of the data driven transformation strategies and ensures that
the enterprise digital resources serve the business strategy Emphasizing
digital governance structures and processes to ensure that digital
transformation initiatives are aligned with strategic business objectives and
visualizing the balance between investments that run the current business,
grow existing businesses, and have the potential to transform the business;
Value creation by managing projects to be on time, on budget, and deliver
expected results; and value creation by growing revenues through better
informed decisions by increasing market share, reducing costs, and enabling
new products and/or services.
While the business environment will continue to experience rapid change in the
forms of mergers, acquisitions, strategic alliances, global partnerships, or
dramatic economic changes and pressures. In the face of increasing levels of
business and technology change, CIOs are attempting to build robust,
standardized, flexible IT architectures and IT organizations
Brown, (2006)

3. Research problem
• BOD of directors and business leaders have a lack of understanding the
importance of data driven transformation strategies and its implementation
on the sustainable maximization of company profits, in this paper we want to
prove the significant relationships between the main responsibility of BOD to
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maximize the company and shareholders profits and the implementation of

digital governance applications
• We will test existing theory or explore and develop new theories through the
research
• We Will focus on the impact of digital governance ROI of samples of the big
locals and big international companies located in Egypt
Advanced Corporate Governance

4. Hypothesis Development:

We will discuss in this paper the impact of digital governance applications on the
quality of oversight role of the board of directors supposing the following
hypothesis

Data Driven Decision Making and Maximizing Company Profits

Maximizing companies’ revenues and protect their market share against

competitors and disruptive business models, industrial sectors increasingly rely
on technology in various operations. However, the extent to which the adoption
of technology innovation resulted in the maximization of company’s revenues
Alrawadieh, Cetin ( 2020 )

• H1= The Maturity of Data driven practices have a significant relationship

with on BOD capabilities to maximize Companies Net Profit Ratios
Optimizing Information Governance Framework and Maximizing Company
Profits

Using a hand-collected representative sample of 95 publicly traded American

firms from various sectors in 2015-2016, I examine how information system
security affects the financial performance of firms. I find a positive and
significant effect of information system security on a firm’s return on equity,
return on assets, and profit margin in the subsequent year
Lancee (2017)

• H2 = Significant relationship between the application of Information

Governance Practices and BOD capabilities to maximize Companies Net
Profit Ratios

Bringing Digital IQ to the BOD and Maximizing Company Profits

Having a digitally savvy top leadership team — that is, a team in which more
than half of the executive members are digitally savvy — makes a huge
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difference. Our latest research shows that large enterprises with digitally
savvy executive teams outperformed comparable companies without such
teams by more than 48% based on revenue growth and valuation.
Weill, Woerner, and Shah (2021)
H3 = Significant relationship between brining digital IQ to the BOD and BOD
capabilities to maximize Companies Net Profit Ratios

5. Data collection & Sampling Method

Population
Our population will be the Board of directors of 100 Fortune in Egypt Economy
Dependent Variable
Dependent variable will be the BOD Capabilities regarding Maximizing
company profits

Independent Variable
• Existence of Data driven maturity assessments
• Significant relationship between the application of Information
Governance framework Practices
• Significant relationship between brining digital IQ
▪ Apply Data driven maturity assessment for 42 companies– Most of these
assessments will be applied in listed companies and focus mainly on the
existence of the data practice success elements these assessments will
send to a sample of CTO, CIO, CRO or CSSO as they are the best persons
can answer such assessments the embedded questions consisted on 4
main pillars assess:
▪ People and Culture
▪ Data practice activities
▪ Business process optimization
▪ Technology
▪ We will get and analyze the financial statements for the 42 companies which
we apply the data driven maturity assessment to check the impact of the
independent variables tested in this assessment on the financial
performance of the companies
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6. Methodological approach

• Method of analysis
✓ We will follow a mix of Research methodologies between quantitative and
qualitative approaches to gain more complete picture of the problem and
strengthen the credibility of the conclusion
✓ We used qualitative research to develop the mentioned hypotheses and
then we will test it with quantitative data then use quantitative research to
test and validate the hypotheses then collect qualitative data that helps
interpret the results
Table includes
Dependent variable Reference Measurement
Shareholders profits CFA Institute Profit

Independent variable Reference Measurement

Data driven Garter (2018) Score Card - DDMA
transformation strategies
Information Governance COBIT Score Card for the Information
practices (2014) Gov Maturity
Bringing digital IQ Digital IQ.net Number of members having
(2021) digital IQ

➢ Quantitative
✓ We will apply the data collection and preparation step including Checking
the data quality
✓ We will use SPSS software to apply statistical test using Regression
models because the purpose of this paper is to test the significancy of
relationship between the dependent variable and the independent
variables so we can approve the impact and importance of the digital
governance applications on the achieved profits resulted from such
transformation using the following equations
Dependent Variable - Oversight role = Y = X0 + X1 “DDDM” + X2 “InfoGov” +
X3 “DigIQ” + E
➢ Qualitative
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▪ During the interviews with the business leaders and reading the
assessments and its patterns of responses we will analyze the language,
image & interpretations of the business leaders for the following points
✓ In-depth understanding of experiences, beliefs, cultures or ideas of
the organization
✓ Analyze the patterns of behavior, culture, awareness, buy-in &
desire for change for each company and business leader
✓ Interpret and understand subjective experiences
✓ Explore an under-research problem and generate ideas for further
research
▪ This will help us to approve and support the quantitative test applied by
matching the proper understanding, awareness and intention for transform
with the quantitative numbers resulted from quantitative test
▪ Upon listing the patterns and completing satisfying Regression models
because the purpose of this paper is to test the significancy of relationship
between the dependent variable and the independent variables so we can
approve the impact and importance of the digital governance applications on
the achieved profits resulted from such transformation

7. Results

Linear Regression Analysis

The regression model followed in this paper is

Y = X0 + X1 “DDDM” + X2 “InfoGov” + X3 “DigIQ” + E

When:
Y is the Dependent Variable (Companies Net Profit Ratios.)
X1 is the first Independent Variable (Data Driven Maturity level )
X2 is the second Independent Variable (Information Governance Framework
Maturity level )
X3 is the third Independent Variable (percentage of Digital IQ in companies
BOD

SPSS results
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Variables Entered/Removeda

Model Variables Entered Variables Removed Method

1 DDMA, DigiIQ, InfoGovb . Enter

a. Dependent Variable: NetProfitRatio

b. All requested variables entered.

Model Summary
Std. Error of the
Model R R Square Adjusted R Square Estimate
1 .701a .492 .451 18.89395

a. Predictors: (Constant), DDMA, DigiIQ, InfoGov

ANOVAa
Sum of
Model Squares df Mean Square F Sig.
1 Regression 13118.354 3 4372.785 12.249 .000b
Residual 13565.289 38 356.981
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Total 26683.643 41

a. Dependent Variable: NetProfitRatio

b. Predictors: (Constant), DDMA, DigiIQ, InfoGov

Coefficientsa

Unstandardized Standardized
Coefficients Coefficients

Model B Std. Error Beta t Sig.

1 (Constant) -32.938 11.419 -2.884 .006

DigiIQ .094 .154 .092 .608 .547

InfoGov .204 .185 .168 1.102 .278
DDMA .696 .238 .517 2.928 .006

a. Dependent Variable: NetProfitRatio

Interpretation, Conclusion and Recommendation

From the summary Model it resulted in acceptable way as the Adjusted R Square was
.451, which refer to that 45.1% from change in dependent variable “company profits “
is explained by the independent variables “ Information System Security , DDMA, &
Digital IQ “

From the ANOVA table, the sig. is .000 less than 5% which mean that the model as a
whole is significant
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From the Coefficients table the model resulted to found that the sig. of X1 & X2
variables “ digital IQ & Optimizing Information Governance framework practices
variable” is .0.547 & .278 was more than 5% which means that we do reject H1 for
both variables which assumed that there is a insignificant relationship between the
high percentage of Digital IQ and optimizing information governance framework in
the companies BOD and maximizing companies profit shares However regarding
the remain independent variables of the Coefficients table the result refer to the
sig. of X3 is .006 which less than 5% which refer to significant relationships
between data driven maturity in building digital strategy and the BOD capabilities to
maximize company profits in which this result also refer to the most important
component of digital governance practices in any organization as it refer to mature
data practices & man power maturity and technology infrastructure which consider
the bigger components in digital governance framework
results was supported by Alrawadieh, Cetin ( 2020 & Lancee (2017) and Weill,
Woerner, and Shah (2021) that emphasis direct significant impact of digital savvy for
the BOD and information system security practices on company profits even though
the model shows insignificant relationships directly for these two variables with the
company profits but the data maturity assessment significant relationships which
already include the digital savvy and information system security awareness in the
company culture support the direct relationships with X1 and X2

Interpretation

As a results, I would assume that following and optimizing important components of

digital governance, and specially raising the awareness of data driven decision
making practices with in organization culture and enhancing the high-tech
infrastructure and data practices empower the digital governance framework and
practices which will have a very positive impact of company profits and empowering
BOD to execute their roles related direct and control organization performance to
achieve their ultimate goal to maximize company and shareholder profits

Conclusion
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o As the model shows that strong relationships with the data driven maturity
assessment of the organization although and there is no significant relationships
with information security systems and high percentage of digital IQ of the BOD this
refer to important point that the maturity of all company employees is crucial and
not only the maturity of BOD and on the other hand even with the importance of
information system security but still the personal awareness of all employees
across all managerial level is important to empower the technology infrastructure
and to maximize the company profits

Recommendation

Referring to the results of this paper and the statistical results I strongly recommend
to the regulatory bodies in Central Bank, Financial regulatory authority, GAFI and
other regulatory and inspector bodies in Egypt to apply data driven maturity
assessment with in the control self-assessment practices of all organization
specially practices related to Internal control integrated framework and the internal
control report which was mandated to the Banking sector in Egypt and apply such
practice on the NBFS and other sectors to be mandatory, also encourage other
researchers to link between the results of this paper and embedding data practices
maturity as an integrated process with all functions with a clear mapping with COSO
13 & COBIT framework components, principles & focus points in addition to direct the
External auditors to include the assurance services of such practices in their
independent report which will have a strong impact to empower AI strategy of Egypt
and Government data exchange platform already developed by ministry of planning,
administrative inspector institute and ministry of telecommunication to achieve Egypt
“ ‫“ مصر الرقمية‬

In addition to this reporting will make these insights and data available and enable
the decision makers and the regulators to measure and enhance such practices
which impact sustainability and growth of the Egyptian national economy
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References:
▪ Max Bankewitz1, Carl Åberg1 & Christine Teuchert1 (2016) Digitalization and
Boards of Directors: A New Era of Corporate Governance?- Journal
sciedupress
▪ (Carl Åberg, Niloofar Kazemargi & Max Bankewitz (2017); Strategists on the
Board in a Digital Era? – Journal sciedupress
▪ (Martin Hirt and Paul Willmott (2014). – Academia Journal
▪ Terry McNulty, Andrew Pettigrew (1999) Strategists on the board.
Organization Studies – Journal SAGE
▪ Lena Eisenstein, (2015) :Digital Governance Best Practices – Journal Board
Effect
▪ Iqbal Afra Saiyara (2019) Digital presence of a traditional organization –
Journal Brac University
▪ William C. Brown, (2006) IT governance, architectural competency – Journal
Emerald insight
▪ Zaid Alrawadieh, Gurel Cetin ( 2020 )- Digital Transformation and revenue
Management – SAGE Journal
▪ Whetman, Lancee L. (2017) "The Impact of Sustainability Reporting on Firm
Profitability," – Digital commons Journal
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▪ Peter Weill, Stephanie L. Woerner, and Aman M. Shah (2021) Does Your C-
Suite Have Enough Digital Smarts? – MITSloan Management Review Journal