Reputational and Regulatory Risk are Top Concerns of Boards
2013 IT Risk Management Survey
EisnerAmper’s 2012 Concerns About Risks Confronting Boards Shows CEO Succession and IT Risk Significant Concerns
Directors Report Significant Interest in the Expanding Role of Internal Audit as a Risk Mitigation Strategy
EisnerAmper today issued its third annual Board of Directors Survey, Concerns About Risks Confronting Boards, designed to gain insight into the risks that are top of mind in today’s boardrooms. More than 190 board members, sourced from both EisnerAmper and NACD Directorship databases, were surveyed with respondents drawn from public and private companies. Sixty-eight percent of the survey group identified themselves as serving on audit committees.
Other than financial risk, respondents were asked to identify risks of most concern. 66 percent identified reputational risk as their primary concern. Regulatory & compliance risk was a close second at 59 percent, followed by IT Risk at 54 percent and CEO Succession Planning at 53 percent.
Click on Concerns About Risk Confronting Boards to access the complete 2012 report.
Commenting on the Survey’s results, Steven Kreit, a partner in EisnerAmper’s Services to Public Companies practice, said “Reputational risk remains top-of-mind but what is emerging is a broader view of what reputational risk entails.” The results reveal that directors view reputational risk as comprising operational and human elements. Functional concerns such as product liability, outsourced networks, privacy and data security factor in with employee-related issues such as fraud, customer relations and crisis management.
Regulatory and compliance risk is still very much a concern of boards. When asked to rate their concerns about upcoming regulatory action, almost 60 percent cited mandatory audit firm rotation as important. More than half of the respondents said that financial reform was of high or moderate concern. Commenting on these findings, Peter Bible, Partner and co-leader of the EisnerAmper Services to Public Companies practice, said “Boards have an ever-increasing demand put on them to review… the effects of myriad new rules. Added to this is the requirement to be knowledgeable about international agreements, treaties and tax laws. It is no wonder directors cite regulatory risk as being of significant concern.”
New to this Report were questions about directors’ views concerning the use and composition of their firms’ internal audit function. Almost 80 percent said their companies were turning to the IA department for help in identifying risk. As Jim Mack, Partner and leader of EisnerAmper’s Consulting Group said, “Developing more comprehensive skills…with regard to controls…represents an opportunity for companies which view enterprise-wide risk assessment as a critical concern.”
Growth opportunities are of importance to directors, with sixty-eight percent citing mergers and acquisitions as being an investment option for their firms. Of particular note, 71 percent of respondents said that internal growth and expansion was a timely opportunity – a result that is fully twenty percent higher than reported just last year. Michael Breit, Partner and co-leader of EisnerAmper’s Services to Public Companies practice, said “Investment and re-investment should be of importance to boards now as expanding internal capabilities might be a real momentum builder and an advantage with regard to a highly competitive marketplace for talent.”
Summarizing the Report’s overall findings, Charly Weinstein, Partner and EisnerAmper CEO, said that “Today’s director is being asked to be aware of a seemingly endless variety of concerns and this ‘full plate’ could itself be a risk. A useful discussion might be had on whether concerns about risk should be centralized in its own committee of the board.”