Dec. 21 post
One list comes from the very prolific and opinionated Norman Marks of the Institute of Internal Auditors, a thought leader on internal audit, corporate governance, risk management and compliance who is responding to KPMG Audit Committee Institute’s Ten To-Do’s for Audit Committees in 2011 list
. Another is the annual list of Top Challenges for Financial Executives
by Marie N. Hollein, president and CEO of Financial Executives International. The other list, which I just received today, comes from Michael Rasmussen, president and owner of Corporate Integrity LLC, a corporate governance, risk management and compliance (GRC) think tank and advisor.
In his Jan. 5 Marks on Governance blog post
, Marks gives a retort to ACI’s list saying any Top 10 list for directors on public companies in 2011 should lead with the myriad of issues related to risk management. In fact, he is the only one I could find who attempted to create a true Top 10 list. All the others decided against putting the issues in any particular order. (For the record, the ACI list includes risk-related issues in three of its 10 “To-Do’s.”)
“My list would definitely include in the top five priorities a focus on whether the information management uses to run the business is timely, current, and reliable,” Marks wrote. “This is an issue that caused a number of businesses to fail. Not only were they relying on historical operational performance data, but risk-related information was also old. In some cases, executives did not receive key pieces of information. The board should also question whether it is receiving complete, reliable, current, and timely information.”
The Top five issues in his list (click here
for his full list) are:
1. The adequacy of risk management processes and framework
2. Coordinating oversight of governance and risk management with the board and other committee
3. Cash flow, credit, and capital structure
4. The quality and timeliness of information used to run the business (This is an issue Marks says is quite important since a number of businesses that failed during the financial crisis relied on old risk-related information and historical operational performance data.)
5. Formal reports by internal audit on the adequacy of governance, risk management, and related internal controls
(For the record, six of Marks’ Top 10 issues are risk-related and his is the only list I can find that includes any mention of internal audit.)
The FEI list, as one would expect, is geared toward CFOs and other U.S. financial executives and not so much for directors. But many of the issues that usually wind up on the list affect how public and private companies do business. The list is probably one of the more anticipated ones since it has been around so long.
Of the items on the FEI list (note that there are nine in no particular order), there are four that were on the 2010 list. They are:
Economic Recovery and the U.S. Fiscal Outlook:
Economic indicators are improving, according to FEI’s latest CFO Outlook survey. But many uncertainties remain, such as the effect of the Federal Reserve’s quantitative easing program (QE2), concerns over certain aspects of the global economy and the impact federal regulators will have on industry.
Health Care Law:
Employers have already felt the effects of the law as some had to recognize an accounting charge when the tax deductibility of the Medicare Retiree Drug Subsidy was eliminated, coverage of dependent children was extended to age 26, and a restriction of annual maximum benefit limits was implemented.
Financial Regulatory Reform (Dodd-Frank Act):
Though the sweeping Dodd-Frank Wall Street Reform and Consumer Protection Act was enacted last July, its impact may not be fully understood for some time, as federal regulators begin issuing and implementing rules authorized under the act on provisions from corporate governance to consumer financial protection… financial executives should be concerned, for example, with guiding regulators toward maintaining exemptions for corporate end-users utilizing derivatives products to effectively manage business risk.
Global Convergence of U.S. GAAP and IFRS:
Key projects slated for completion are those for which a public exposure draft has been issued: financial instruments, revenue recognition, leases, other comprehensive income and fair value measurement.
Rounding out the list are such issues as private company accounting system reform, uncertain tax positions, business taxation, pending international business issues and climate change. To read the full FEI list, click here
Rasmussen’s list is a blog post that he calls GRC 2011: Gripes and Directions
. The directions portion of that post is a list of 11 GRC predictions he makes. Some of the more noteworthy predictions are:
Standardized GRC process and definitions:
Much of the problem about GRC is a lack of standardized guidance. This is changing as the Open Compliance and Ethics Group (OCEG) GRC Capability Model
has grown in popularity and adoption.
GRC professional certification:
The OCEG is poised to roll out the GRC Professional Certification in the next month. This is an encouraging process to get more individuals trained and supporting a common GRC framework.
The Year of corporate compliance:
2011 is the year that the most significant growth will be in the corporate compliance department. This is a department that has been burdened by manual and ad hoc processes for years, and is now becoming aware of how technology, particularly integrated with content, can streamline operations.
Performance and ERM:
Rasmussen sees growing interest in ERM being driven by the board down and focused and integrated into strategy and performance.
Much of the GRC focus has been on the Global 1000 – attention is now moving to encompass the mid-market companies. This starts with solving immediate pressing problems and expanding to other areas with consistent processes and technology.
With the first week of the New Year just about over, I have come upon three more top issues lists for directors and management in 2011. Consider this an addendum to my