BDO in the Boardroom – Détails, épisodes et analyse

Key Takeaways:

• The SEC and DOJ are imposing record-breaking financial penalties to hold wrongdoers accountable for misconduct, while also offering credit to those who proactively self-monitor, self-report, and remediate misconduct.
• As highlighted by recent cases, internal investigation procedures and remedial actions are commonly cited as key factors related to the regulator’s view of cooperation and the determination of reduced penalties.
• Boards must ensure the company has established protocols and resources to identify, investigate, discipline, and remediate violations of laws, regulations, or company policy.
• Conducting a timely and thorough internal investigation can demonstrate to regulators the Board’s commitment to compliance, potentially helping to avoid or reduce penalties and support a healthy compliance culture.
• Where misconduct is identified, the board must determine suitable corrective measures and establish an action plan.

Related Resources:

• Podcast: Audit Committee: Alleged Fraud, Now What?
• Archived Webinars: The Board’s Oversight of Fraud

Key Takeaways and Tax Planning Points:

To prepare for changes in tax regulations, boards should:

• Confer with management to review financial models – e.g., changes in tax rates, deductions, credits, and exclusions.
• Stay informed on tax policy changes and reviewing with management to understand realistic scenarios.
• Consider the possibility of a divided government scenario, which may result in sluggish legislative activity and short-term extenders for expiring provisions.
• Understand the organization's tax risk management policies, focusing on compliance, reporting, and consulting to assess how changes in tax law or procedure could affect the risk profile.
• Get regular updates on tax policy changes, especially after the election, to anticipate potential impacts on international and global tax strategies.
• Ensure that tax policy aligns with the firm's social policies, particularly in relation to ESG policies and tax credits promoting certain behaviors or investments.
• Consult with external tax advisors to stay abreast of tax policy changes and ensure coordination with the organization's internal tax team.

Resources:

• 2024 BDO Tax Strategist Survey

Boards need to work with management team to continue to identify and prioritize opportunities in automation to enhance all aspects of operations, product development and service delivery.

• Challenges in implementing automation need to be identified and incorporate into a strong change management program to ensure enterprise-wide acceptance and adoption.
• Boards can play a significant oversight role in the automation process by helping management establish guardrails – policies, protocols and controls – and require reporting back on progress as an accountability mechanism in driving change.
• Become and remain familiar with emerging automation technologies and methods to be competitive and optimize the business’ capabilities.

Key Takeaways:

1. Approaching embedding AI into a service delivery model requires:

• Identifying and prioritizing AI business processes and use cases that align with your business objectives
• Assessing the feasibility and potential impact of each use case
• Developing a detailed implementation plan that contemplates the steps, resources, and timelines required for successful AI adoption
• Keeping cybersecurity at top of mind as well as quality assurance approaches.

2. Adoption and use of AI requires encouragement of curiosity and innovation tempered with a good understanding of the risk and challenges AI poses to current methods of obtaining and authenticating data.

3. Compliance with regulatory standards needs to factor into AI change management along with corporate culture, policies and procedures regarding the use of AI.

4. Auditors are currently embracing AI in measured approaches – e.g.:

• Leveraging digital assistants as a gateway to demystify technologies and to bring the talent pool up to speed on the basics – what it is, how they work, and general best practices.

• Using generative AI environments to streamline and further standardize the firm’s service delivery models and build capacity.

• Embedding AI into existing tools to surface unusual and irregular transactions that the humans may otherwise miss as quality focused.

• Considering AI-powered image recognition in verifying physical assets and reconciling with financial records.

Key Takeaways:

• Service delivery models demand that auditors demonstrate their efforts are directed principally to potential risks and anomalies and areas of higher risk.
• Boards that derive the most value from audits that leverage data analytics are those that have pretty specific views of what constitute outliers or anomalies for the business and that understand the auditors’ demonstrations of how their analytic tools can quickly surface and identify risks and patterns that may not be immediately apparent through traditional audit methods.
• Boards have potential opportunities to enhance both the value of the audit as well as the reporting information provided by management – e.g., address disparate systems, enhance limited data hygiene and inexact controls around data.
• Greater scrutiny of information, including relevant controls over data and data integrity, requires auditors to focus on modernizing their professionals’ experience, as well as audit technology development, as they are the agents of change in enhancing audit quality.
• Boards should be asking their auditors to show them the value that data analytics is providing and become better informed as to: how difficult is the data to extract; how much cleansing is necessary; does it reconcile; how well is it controlled; etc.

Key Takeaways:

• Use of technological automation in the audit can yield increased efficiency, improved accuracy, consistency and quality.
• Complexity, data quality, lack of flexibility, resistance to change and over-reliance on technology are challenges to automating auditing procedures that need specific consideration.
• Auditors are intentionally and systematically focusing on automating aspects of the audit that build capacity and streamline systems but that also focus on feedback and enablement of adoption.

Board members should be asking auditors about automation use cases and recommendations for improvements to apply to their own financial accounting, reporting and controls areas.

Key Takeaways:

• Building corporate sustainability is not about “being responsible for” but rather recognizing “how to work in concert with” a broader group of stakeholders to reduce friction and produce better results.
• Innovation in a staid industry requires:

- Creation of an environment to embrace and enable change – first speak about what will remain the same and season in what the change will be.

- Recognition that incumbency is NOT powerful (i.e., faulty assumption that formulas in the past will work in the future)

- Innovate by embracing what is evolving – e.g., technology

• Adopt a simple "Measure/Report/Reduce” framework – allows managements to act and the board to make informed decisions based on data-driven metrics to drive accountability and achieve whatever the “reduction” goals are – e.g., emissions, talent attrition, customer loss, use of resources, barriers to entry, etc.
• Don’t make the mistake of focusing heavily on low hanging fruit instead of looking broadly at both risk and opportunity
• Oversight tool: Instead of asking management “How do we make this?” consider the asking “How do we make this better?”

Resources:

• Book: BOOM! Deciphering Innovation: How Disruption Drives Companies to Transform or Die
• Resource Center: BDO ESG Center of Excellence

Key Takeaways:

• The NEED: Data governance programs exist to manage change in data assets overtime.
• The WHAT: Data is an intangible asset that is constantly evolving and has a host of characteristics that make it difficult to manage compared to traditional assets.
• THE WAKE-UP CALL: When surveyed, 95% of respondents felt data governance programs were unsuccessful.
• The PITFALLS: Poor data governance stems from: poor data quality, lack of enforcement of policies and procedures; and data security and privacy practice that don’t evolve with hacker sophistication.
• The HOW:

- Board directors should be asking corporate management the following:

- Does the company have a data governance program?

- Is the data governance program working? How do you know?

- What assistance does the data governance program need from the board?

• Directors should encourage management to decompose data governance problems into smaller initiatives and ask for stratification of data governance decision-making so that people at the right level are making decisions about data.

Resources:

• Data Privacy and Governance Checklist for the Board

Key Takeaways:

The basic tenants of succession planning require continuous focus and consensus and can provide an outline for preparation and vigilance. These include:

• Agreement on short- and long-term company goals
• Needed skills for the position - Keeping the job description of the upcoming vacancy current
• Keep a pipeline of candidates that span an array of various disciplines and experiences

Boards should build in process and policy around board refreshment.

Board composition should be built for purpose - Consider directors with multiple skills and experiences so there is overlap existing in the boardroom.

Succession doesn’t end with appointment – it further requires a robust onboarding system for the new director.

Expanding the board to accommodate new board members before the departure of a retiring director can efficiently provide transfer of institutional knowledge and avoid “reinventing the wheel.”

A board member with shareholder engagement skills and investor understanding that can help management articulate their story is the best defense against activists.

Resources: 

• “What ‘Succession’ Gets Right (and Wrong) About Business Continuity Planning [Spoilers]
• Think Like an Activist

Key Takeaways:

Funding for the CHIPS Act has been signed into law. This act provides tremendous opportunities for semiconductor industry organizations to expand production in the U.S. and additionally, provides many other benefits to the economy.

This podcast discusses:

• Opportunities for national economic initiatives for organizations that can pass threshold question – How does the project enhance national economic security?
• Under the Act, lessons have been learned from PPP funding during COVID and the need for attestations to counter fraudulent/inappropriate use of funding, which came back to haunt many companies who could not support their use of PPP funds after the fact.

Resources:

• Archive Webinar - The CHIPS Act Has Passed: Now What?
• What Semiconductor Organizations Need to Know about the CHIPS For America Act
• Semiconductor Industry Association