Episodes
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Key Takeaways:
Engaging with Stakeholders: Consider the importance of addressing every inbound inquiry, whether from activists, institutional investors, or shareholders. This involves methodical rigor and balanced engagement to understand and address the underlying concerns.Evaluating Board Performance: Allows for continuous evaluation of board performance, effectiveness, and skills. This includes assessing vulnerabilities and ensuring that the board is equipped to address current trends and macro-environmental impacts.Succession Planning: Nom/Gov committee plays a critical role in defining long-term succession objectives and plans and considering the viability of leadership in multiple levels of the organization for selection, retention, and refreshment/removal of the CEO, C-suite along with the âplus 1âs and 2âs (next level management) as well the board itself. This involves evaluating the needs of the organization and ensuring there are no critical skills gaps.Committee Structure and Allocation: Be accountable for reviewing and optimizing the allocation of responsibilities among all standing and potential other committees of the board. This includes considering rotations and refreshes based on a rationale thought process.5. Corporate Resilience, Culture, and Talent Management: Stress the importance of focusing on the futureproofing of the company by ensuring good due diligence, strong corporate culture, and effective talent management across the organization. This includes considering evolving and shifting regulatory, competitor, and M&A landscapes while integrating new technologies and understanding their impact on people and culture. -
To prepare for potential continuation of and/or changes in tax regulations, boards should be taking a vigilant watch and see approach and monitoring respective timing, effective dates and expiration dates:
Confer with management to review financial models â e.g., changes in tax rates, deductions, credits, and exclusions. Get regular updates on tax policy changes to anticipate potential impacts on international and global tax strategies. Weigh the more likely scenario that legislative activity taken may allow more permanent actions to extend expiring provisions under current tax laws. 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 companyâs risk profile. Consult with external tax advisors to stay abreast of tax policy changes and ensure coordination with the organization's internal tax team. -
Episodes manquant?
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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 regulatorâs 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 Boardâs 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 Boardâs 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 â 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 -
Key Takeaways:
GenAI can be used to enhance the efficiency and effectiveness in financial reporting and internal controls over financial reporting. Currently, GenAI can help with tasks such as drafting financial statement disclosures, summarizing key contract terms, categorizing expense transactions, and preparing travel and expense reports.However, GenAI is predictive technology that provides users with a probable response, so itâs not going to be 100% accurate and requires human oversight, review, and judgment.Boards should consider the rigor of their GenAI-related governance policies for:- Responsible, ethical use- Expertise and training requirements- Data privacy and security requirements- Deployment, technology testing, and monitoring - Mitigating fraud, legal, regulatory and associated compliance risks Boards should engage in critical conversation with management about their decisions to use GenAI and how they are assessing related risks, including risk introduced by third parties, and the need for new/enhanced controls.Boards should also apply an appropriate risk framework. Asking the auditor how audit procedures are being adjusted to evaluate significant risks associated with use of data and the GenAI models in developing estimates, judgments and other information that has an impact financial reporting and disclosure. This would further include understanding technologies that the auditor may be using to perform their audits.Additional Resources:
âą CAQ Publication: Auditing in the Age of AI
âą CAQ Audit in Action: The Age of Generative AI: How the Profession Can Respond
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Key Takeaways:
Audit Committees should have a playbook when allegations of fraud arise. The Audit Committeeâs response level to a particular allegation will depend on the scope of the allegation and the corporate environment.Determining when an independent investigation is necessary and how independent it needs to be is determined by the context of fraud allegations. Timeliness is critical. Care should be taken in communicating with stakeholders. -
Key Takeaways:
One of the roles of a board of directors is to continually assess the company and make decisions in the best interest of sustaining value for the long-term.Decisions to change business models should be weighed against the core purpose of the organization.Significant strategic changes necessitate the board to broadly evaluate the impacts on significant internal and external stakeholders.References:
SEC Chief Accountant Statement: Audit Independence and Ethical Responsibilities: Critical Points to Consider when Contemplating and Audit Firm RestructuringBDO as an ESOP Company -
Key Takeaways:
Culture is a team sport that requires the right data for the right stakeholder (including the Board). Protecting culture is just as important as strengthening your culture. There is a measurable ROI to culture. A proxy for culture is measuring organization effectiveness.Resources:âŻâŻâŻâŻ
Nominating & Governance Committee Priorities for 2024: Excelling in Board Leadership CalPERS, Schroders Launch Framework Tying Human Capital Management and Value -
Key Takeaways:
While simple in structure, these new requirements have complex implications for companies, many of which may not be already gathering and reporting this level of climate data.The laws were years in the making but have now pre-empted the country-level SEC climate rules that many have been anticipating. Scope 3 reporting will be required for some companies, which includes the full value chain. Third-party assurance will be required in some cases.Even though the full extent of the requirements wonât come into force until 2030, the first requirements will be in 2026 covering the year 2025, so companies should get started now.Resources:
Prepare Now: California Climate Laws Impact Thousands of BusinessesSustainability and ESG Regulations Are GrowingThe Greenhouse Gas Protocol: Measuring Scope 1, 2 and 3 EmissionsPreparing for the Proposed SEC Climate Disclosure RuleBDO Sustainability and ESG Services -
Key Takeaways:
Establishing a âsafeâ environment for AI isnât just a protective stance, it is itself a strategy that accelerates innovation, builds trust, and ensures long-term success.
In making the decisions to address entity- readiness to greenlight AI initiatives, boardsâ due diligence includes:
understanding how competitors, customers, employees as well as supply chains are using or would like to use/leverage AI; establishing a robust management risk management and oversight governance framework that provide appropriate mechanisms to protect proprietary data; and ensuring internal organizational parameters of AI use consider ethics, explainability, data reliance/privacy/security, talent/expertise, and strategic fit; andapplying standardization for consistent and ethical development and deployment. -
Key Takeaways:
Using AI and predictive capability is not new but generative AI brings AI to the mainstream due to its human-like communication and ease of accessibility to companies of all sizes. For boards to properly oversee AI risk, they need to require management to establish a model risk management process along with a model risk governance framework around AI implementation that includes standardization of algorithms, governance and ethical considerations as well as validation of data inputs and outputs.Moving to AI changes the human role and underscores the need for a strong risk culture and exercising of healthy skepticism to contend with potential bias, complexity and lack of integrity within both data sets and AI algorithms.Underlying data sets must be of high quality and representative of population they are intending to serve â free from bias, properly labeled and annotated.Boards, management and auditors will need to continue to stay apprised of what is sure to be a continually evolving standard setting and rule-making environment as technologies continue to evolve. -
Key Takeaways:
Leveraging data analytics for strategic decision-making: Use of data analytics in the boardroom to is becoming increasingly important to help directors make informed, evidence-based decisions that drive growth and efficiency. By incorporating data-driven insights, businesses can better understand their customers, optimize operations, and identify new opportunities.Overcoming challenges in implementing data analytics: Organizations need to be prepared to face significant challenges when adopting data analytics, such as data quality, integration, and fostering a data-driven culture. Listen to best practices and practical advice for overcoming these obstacles and ensuring a successful analytics implementation.Boardâs role in promoting data-driven culture: The board can play a critical role in promoting a data-driven culture within the organization. By asking the right questions, setting expectations, and ensuring alignment with business objectives, boards can support management teams in harnessing the full potential of data analytics for the organizationâs success. -
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 â policies, protocols and controls â 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 businessâ 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 objectivesAssessing the feasibility and potential impact of each use caseDeveloping a detailed implementation plan that contemplates the steps, resources, and timelines required for successful AI adoptionKeeping 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 â e.g.:
Leveraging digital assistants as a gateway to demystify technologies and to bring the talent pool up to speed on the basics â what it is, how they work, and general best practices.Using generative AI environments to streamline and further standardize the firmâs 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:
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.
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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 auditorsâ 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 â 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 professionalsâ 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:
Building corporate sustainability is not about âbeing responsible forâ but rather recognizing âhow to work in concert withâ 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 â 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 â e.g., technology
Adopt a simple "Measure/Report/Reduceâ framework â allows managements to act and the board to make informed decisions based on data-driven metrics to drive accountability and achieve whatever the âreductionâ goals are â e.g., emissions, talent attrition, customer loss, use of resources, barriers to entry, etc. Donât make the mistake of focusing heavily on low hanging fruit instead of looking broadly at both risk and opportunityOversight tool: Instead of asking management âHow do we make this?â consider the asking âHow do we make this better?âResources:
Book: BOOM! Deciphering Innovation: How Disruption Drives Companies to Transform or DieResource 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 donât 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 goalsNeeded 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 experiencesBoards 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 doesnât end with appointment â 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 âreinventing the wheel.â
A board member with shareholder engagement skills and investor understanding that can help management articulate their story is the best defense against activists.
Resources:âŻ
âWhat âSuccessionâ 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 â 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 ActSemiconductor Industry Association - Montre plus
