Continued economic uncertainty and a new presidential administration in the US pose unforeseen risks for audit committee members and companies should ramp up risk management programs.
According to a new survey by the consulting group KPMG, more than four in ten (41%) of the 832 audit committee members polled say the effectiveness of risk management programs is the greatest challenge to their organizations in the next 12 months. Only 38% say their company has a robust risk management system in place, while 42% say their company’s systems require substantial work.
The biggest problem facing audit committee members in 2017 is not knowing enough about the business, according to the data. Most members are seeking a better understanding of how businesses work and their associated risks. Thirty-nine percent say getting to know those risks will most improve the audit committee’s effectiveness, while 31% say their committees would benefit most by having additional expertise, especially pertaining to cybersecurity and technology.
“The audit committee’s job isn’t getting any easier,” said KPMG partner Jose R. Rodriguez, “particularly given the uncertainty, volatility, and complexity of today’s business environment.”
Just over half of respondents say their committees have enough time and know-how to grapple with growing risks. Fifty-one percent say their audit committees have the time to handle risks while simultaneously carrying out other core oversight responsibilities. But less than half (46%) say they have the proper expertise.
Regulatory compliance (34%) along with both managing cybersecurity risks and “maintaining the control environment in an extended organization” (both at 28%) rounded out the top three most pressing challenges for audit committee members to tackle in the coming year.
Committee members continue to express confidence in financial reporting and audit quality, according to the survey. However, new revenue recognition standards are beginning to worry some committee members. The plurality of respondents (24%) says their boards are still assessing the effects of the new standards and have yet to develop a plan for implementation.