Corporate management, governing boards must redefine relationship to remain relevant

Higher scrutiny, changing risk landscape leads to broader responsibilities and increased accountability

TORONTO, Jan. 21, 2015 /CNW/ - The traditional relationship between Canadian corporate management teams and their governing boards is being redefined to successfully mitigate company risk, according to KPMG's new 2015 Audit Trends report. National and international regulatory changes, growing frequency of cyber security breaches at major corporations and increasing scrutiny on tax transparency are all serving to increase pressure on both parties to broaden their scope of responsibility and work more closely together.

According to the report, the audit committee mandate is expanding from strictly managing financial risk to a broader risk management role. With their already inherent risk focus this broader risk responsibility is a natural step.  However, many organizations are not equipped with the resources needed to mitigate non-audit risks while capitalizing on potential opportunities. Management teams and boards must understand the implications of continuing trends and cooperate to navigate accordingly.

How can Canadian companies mitigate cyber risk, adapt to regulatory change?

• Cyber risk – as discussed in KPMG's 2014 Global Audit Committee Survey, networks and systems of major national and international organizations are constantly subject to potential cyber attacks:
  • Understand your assets – all data is not equal. Identify what is most critical to protect, devote appropriate resources to secure and develop intelligence on key threats those assets may face, to produce actionable information.
  • Ensure management and governance teams receive regular security metrics and cyber incident reports to monitor attacks and trends. Conduct periodic cyber risk assessments and consider the need for an independent risk assessment.
  • Implement internal policies for social media management and monitoring, with clearly defined roles of involvement for both board and management, from approvals to escalation.
    
    
• Tax transparency – paying your fair share of tax is one of the most prominent areas scrutinized by the government and general public, and brings significant complexity and risk:
  • Board and management need to be aware of and consistently monitor an organization's relationship with tax authorities.
  • Schedule reviews of your effective tax rate compared to both peers and statutory rate.
  • Prepare for country-by-country tax reporting and overall greater transparency to your stakeholders regarding tax and corporate affairs.
    
    
• The regulatory landscape – the global and local regulatory environments are highly dynamic and add another layer of risk to company oversight:
  • Don't view compliance as a check list – instead, turn regulatory requirements into leading practices that are embedded throughout the organization to deliver ongoing value.
  • Know your industry-specific regulations in Canada and in all countries you operate, particularly in places such as Brazil, China, Nigeria and Russia.
  • Non-profits should consider the Canada Revenue Agency's Non-Profit Organization Risk Identification Project – which highlights specific high-risk activities.

QUOTES

"A governance agenda that formerly included working with auditors and overseeing financial reporting and controls is evolving to also consider everything from cyber security and social media, to mergers and acquisitions, fraud and forecasting."

-  John Gordon, Canadian Managing Partner, Audit, KPMG

"With continually expanding risk-related responsibilities, management teams and their governing boards and audit committees are working together to achieve financial business objectives, while mitigating an ever-changing risk landscape."

-  John Gordon, Canadian Managing Partner, Audit, KPMG

LEARN MORE

Audit Trends Report
KPMG Website
@KPMG_Canada - #AuditTrends
KPMG on LinkedIn

About KPMG

KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative ("KPMG International"). KPMG member firms around the world have 162,000 professionals, in 155 countries.

The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.

SOURCE KPMG LLP

Kira Froese, National Manager, Communications, KPMG in Canada, 416.777.8928, [email protected]