Global uncertainty, regulatory change, and operational risk pose the greatest challenges for companies in ASEAN, according to a new KPMG survey of over 1,500 Audit Committee (AC) members in 36 countries.
Global uncertainty, regulatory change, and operational risk pose the greatest challenges for companies in ASEAN, according to a new KPMG survey of over 1,500 Audit Committee (AC) members in 36 countries. Among the AC members surveyed, 106 were from ASEAN1 , including 32 from Singapore.
The same survey also found that 40 percent of AC members in ASEAN think it is "increasingly difficult" to oversee the major risks on the AC’s agenda in addition to its core oversight responsibilities. These responsibilities have expanded beyond the traditional remit of financial reporting to include oversight of the risk management process and other areas of risk such as compliance, anti-bribery and corruption, and operational risks. As a result, the time required for ACs to carry out their responsibilities has increased – particularly in Singapore, where over half of ACs now spend significantly more time fulfilling their responsibilities.
"The pressures on audit committees have clearly intensified. At the same time, the audit committee can’t do it all," says Irving Low, Head of Risk Consulting at KPMG in Singapore. "Overseeing financial reporting and audit is a major undertaking in itself, and the risk environment is clearly straining many audit committee agendas today."
As the sources of risks intensify and diversify, audit committee members in Singapore recognise the need for more agenda time to deliberate on them. The top three issues they cite as requiring "significantly more" attention in 2015 include adequacy and effectiveness of controls around both financial reporting and operational risks, and oversight of the risk process.
"The good news is that more boards in Singapore and globally are reassessing or reallocating risk oversight responsibilities to better balance the workload," says Irving Low. In Singapore, half of boards have recently reallocated risk oversight responsibilities among the full board and its committees. 47 percent of Singapore boards have created new committees to focus on specific categories of risks.
"A lighter risk agenda for the audit committee can translate into more time for quality discussions and a deeper understanding of the business. But this requires confidence and visibility of the assurance framework in place across all four ‘Lines of Defence’," he adds.
Indeed, 53 percent of ACs in Singapore cite a better understanding of the business strategy and risks as the most important factor that would improve ACs’ overall effectiveness. Other factors include additional expertise (such as mergers and acquisitions (M&A), and industry knowledge), and a greater willingness and ability to challenge management.
To improve ACs’ overall effectiveness over the longer term, some of the following concerns will have to be addressed:
1 The four ASEAN countries included in the survey were Singapore (32
AC members), Indonesia (30), Thailand (23) and the Philippines (21).