Risk management tops audit committee concerns globally | KPMG | BH

Risk management tops audit committee concerns globally

Risk management tops audit committee concerns globally

More than 40 percent of audit committee members surveyed recently say their risk management programs/processes require “substantial work,” and a similar percentage say that it is increasingly difficult to oversee major risks, according to a new report from KPMG’s Audit Committee Institute.

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Priya

More than 40 percent of audit committee members surveyed recently say their risk management programs/processes require “substantial work,” and a similar percentage say that it is increasingly difficult to oversee major risks, according to a new report from KPMG’s Audit Committee Institute.

“In Bahrain and elsewhere, there is increasing pressure on businesses to ensure that risks are well managed and that the complexity of local and global market conditions are taken into account” said Jeyapriya Partiban, Partner and Head of Risk Consulting at KPMG in Bahrain. “The audit committee’s job isn’t getting any easier. The findings in our report reinforce the practices and priorities that are essential for audit committees to keep pace – starting with having a solid understanding of the business and the critical risks it faces.” Jeyapriya added. 

While audit committees in general express confidence in financial reporting and audit quality, they rank legal/regulatory compliance, cyber security risk, company controls around risk, and tone at the top and organizational culture as among their top challenges in ACI’s 2017 Global Audit Committee Pulse Survey.

Jeyapriya continued: “With growing regulatory requirements on businesses, the upcoming launch of VAT in the GCC and ever mounting threats to cyber security, it would be wise for businesses to plan and prepare to identify gaps and opportunities in existing processes as early as possible”.  

KPMG surveyed more than 800 audit committee members and chairs in 42 countries, including Bahrain, providing insights that audit committees around the world can use to sharpen their focus, benchmark responsibilities and practices, and strengthen oversight. 

Overall, audit committees are largely satisfied that their agendas are properly focused on legal and regulatory compliance issues, maintaining internal controls over financial reporting, and key assumptions underlying critical accounting estimates. However, they see room for improvement when it comes to focusing on CFO succession planning, talent and skills in the finance organization, tone at the top and culture, and aligning the company’s short- and long-term priorities.

Nearly 4 in 10 said the committee’s effectiveness would be most improved by having a “better understanding of the business and key risks,” while nearly a third said additional expertise related to technology or cyber security would be helpful.

The report highlights six key takeaways:

• Risk management is a top concern for audit committees.

• Internal audit can maximize its value to the organization by focusing on key areas of risk and the adequacy of the company’s risk management processes generally.

• Tone at the top, culture, and pressure for short-term results are key challenges – and may need more attention.

• CFO succession planning and bench strength in the finance organization continue to be weak spots.

• Two key financial reporting issues may need a more prominent place on audit committee agendas: Implementation of new accounting standards and non-GAAP financial measures.

• Audit committee effectiveness hinges on understanding the business.

Read the 2017 Global Audit Committee Pulse Survey.

© 2017 KPMG Fakhro, a Bahrain partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. KPMG and the KPMG logo are registered trademarks of KPMG International, a Swiss entity. All rights reserved.

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