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The Impact of Diversity on Board Performance

Numerous studies show the positive effects of diversity on board performance. Diverse individuals can bring different perspectives experience, perspectives, and points of looking at a problem. This can result in solutions that could otherwise be overlooked by an homogenous board. This is especially relevant for boards that comprise people from groups that are underrepresented. They will be able to understand the culture and preferences of these groups that can assist them in better serving these groups as clients.

Furthermore, having a range of backgrounds and experiences within a board can boost confidence and morale. If board members feel that their voices and experiences are heard they are more committed to the success of the business. This is why it’s important to keep track of your board’s progress in encouraging diversity and identifying any issues that require addressing.

Another area where diversity could contribute to reducing risk. A recent study by Berger et al. found that the greater diversity of gender and age on the board can lead to better operational risk management and a reduced risk of market risk. The same study reveals, however, that having a high level of diversity on the board may create problems in cohesion and communication.

Additionally, boards with a diverse membership are more aware of the particular challenges faced by the underrepresented communities, which could prompt them to take action to promote ethical and social responsibility in their operations. This is why it is so important to continue to find and recruit highly skilled women, people of color, and LGBTQ candidates for board positions.




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