Page 13 - demo

13

Six takeaways

Risk management is a top concern for CFO succession planning and bench
audit committees. The effectiveness of strength in the finance organization
risk management programs generally, as continue to be weak spots. Forty-four
well as legal/regulatory compliance, cyber security percent of audit committees are not satisfied
risk, and the company’s controls around risks, topped that their agenda is properly focused on CFO
the list of issues that survey participants view as succession planning, and another 46 percent are
posing the greatest challenges to their companies. only somewhat satisfied. In addition, few are
It’s hardly surprising that risk is top of mind for audit satisfied with the level of focus on talent and skills
committees—and very likely, the full board—given the in the finance organization. Given the increasing
volatility, uncertainty, and rapid pace of change in the demands on the finance organization and its
business and risk environment. More than 40 percent of leadership—financial reporting and controls, risk
audit committee members think their risk management management, analyzing mergers and acquisitions
program and processes “require substantial work,” and (M&A) and other growth initiatives, shareholder
a similar percentage say that it is increasingly difficult to engagement, and more—audit committees want
oversee those major risks. to devote more time to the finance organization,
including the talent pipeline, training, and
Internal audit can maximize its value to
the organization by focusing on key areas resources, as well as succession planning for the
of risk and the adequacy of the company’s CFO and other key finance executives.
risk management processes generally. Two key financial reporting issues may
The survey results show that audit committees are need a more prominent place on audit
looking to internal audit to focus on the critical risks to committee agendas: Implementation
the business, including key operational risks (e.g., cyber of new accounting standards and
security and technology risks) and related controls—and non-GAAP financial measures. Few
not just compliance and financial reporting risks. They audit committees say their companies have clear
also want the audit plan to be flexible and adjust to implementation plans for two major accounting
changing business and risk conditions. changes on the horizon—the new revenue
recognition and lease accounting standards. Given
Tone at the top, culture, and short-termism the scope and complexity of those implementation
are major challenges—and may need more efforts and their impact on the business, systems,
attention. A significant number of audit controls, and resource requirements, those efforts
committee members—roughly one in four— should be a key area of focus. In addition, audit
ranked tone at the top and culture as a top challenge, committees ought to consider whether to increase
and nearly one in five cited short-term pressures and attention to any non-GAAP financial measures,
aligning the company’s short- and long-term priorities as which are an area of significant attention and
a top challenge. Meanwhile, nearly the same percentage comment by regulators worldwide. Nearly a quarter
of audit committee members said they are not satisfied of those surveyed say their role with respect to the
that their committee agenda is properly focused on presentation of those metrics is very limited.
those issues.
Audit committee effectiveness hinges
on understanding the business. Audit
committee members say a better understanding
of the business and the company’s key risks would
most improve their oversight effectiveness. They also
view additional expertise in technology/cyber security
as being key to greater effectiveness, since it would
strengthen their ability to oversee those risks.

© 2017 KPMG Central Services, a Belgian Economic Interest Grouping (“ESV/GIE”) and a member firm of the KPMG network of independent member firms affiliated with KPMG International
Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in Belgium.