On the 2022 audit committee agenda
Emerging from two years of pandemic-driven crisis and disruption, we continue to see how important trust and transparency are—not only to the functioning of the capital markets, but also to customer relationships, brand reputation, and the health and well-being of employees. For shareholders—and, increasingly, from a broader stakeholder perspective—much of that trust and transparency is grounded in the quality of the company's financial reporting and disclosures and the story they tell. To that end, the audit committee's oversight role has perhaps never been more important or more challenging.
The crises of 2020-21 and disruptions they've triggered—from accelerating technology transformations to upending long-standing “norms” of the workplace, business models, and the economy—have added significant stress and strain to financial reporting processes and the risk of control environment. That pressure is likely to continue given the demands for more and better climate and environmental, social, and governance (ESG) reporting, increased cybersecurity risks and ransomware attacks, a fast-changing tax and regulatory landscape, and other factors impacting the global risk environment—including the direction of COVID-19.
Drawing on our research, insights, and interactions with audit committees and business leaders, we've highlighted eight issues to keep in mind as audit committees consider and carry out their 2022 agendas:
- Stay focused on financial reporting and related internal control risks—job number one.
- Monitor the SEC's rulemaking activities on climate and other ESG disclosures and clarify the audit committee's related oversight responsibilities.
- Stay apprised of global tax developments and risks and recognize that tax has become an important element of ESG.
- Help sharpen the company's focus on ethics and compliance.
- Reinforce audit quality and set clear expectations for the external auditor.
- Understand how technology is impacting the finance organization's talent, efficiency, and value-add.
- Help ensure that internal audit is focused on the company's critical risks.
- Make the most of the audit committee's time together.
On the 2022 board agenda
As the country focuses on reopening and companies reposition for the future, it is increasingly clear that resilience—of strategy, the organization, and operating muscle—is proving to be the great differentiator of the pandemic era. From pivoting to "remote everything" and focusing on workforce well-being to deepening digital engagement with customers and recalibrating supply chains, the ability to quickly adapt to dramatic disruptions and dislocations has defined the survivors and thrivers.
The unprecedented events of the past two years have clearly corporate governance processes, including board oversight, to the test. Demands for action on ESG performance, including climate risk, increased cybersecurity risks (including ransomware attacks), economic and supply chain challenges, a fast-changing regulatory landscape, and other factors impacting the global risk environment will continue to challenge even those boards at the top of their game.
In short, boards are at a pivotal moment. As one director recently observed, the need for today's boards to help their company "reimagine, rethink, and reset is probably a once-in-a-generation opportunity."
Drawing on our research, insights, and interactions with directors and business leaders, we highlight eight issues here for boards to keep in mind as they consider and carry out their 2022 agendas:
- Deepen the board's engagement in strategy and envisioning the future.
- Embed ESG, including climate risk and DEI, into risk and strategy discussions.
- Engage proactively with shareholders, activists, and other stakeholders.
- Make talent, human capital management, and CEO succession a priority.
- Approach cybersecurity and data privacy holistically as data governance.
- Reassess the company's crisis prevention and readiness efforts.
- Help set the tone and closely monitor the culture of the organization.
- Think strategically about talent and diversity in the boardroom.
For more information, download the full report below.
- On the 2022 audit committee agenda (PDF/326KB)
- On the 2022 board agenda (PDF/345KB)