Welcome to new board oversight duties…It is one of the great things about board work…it is ever changing and evolving. Every year there is a shift in corporate governance standards in an effort to evolve along with the rapidly changing business landscape and stay aligned with the shifting priorities of investors and regulators. The SEC has new proposed regulations for 2023. On October 26th, 2022 the U.S. Securities and Exchange Commission (SEC) adopted a final rule that requires publicly listed companies adopt a compensation clawback policy.

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Calculating a return on investment (ROI) for internal control automation isn’t easy. Most executives know that the potential damage from a cybersecurity threat or material misstatement can be severe: disruption of operations, reputational damage, loss of customers, and regulatory penalties.  But control failure costs are potential costs, and internal control automation programs are actual costs, making automation initiatives a hard sell. So, how can you identify and quantify the ROI of internal control automation in an environment where buyers are inundated with buzzwords and new technologies that sometimes succeed but often fail? 

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Fraud is dynamic, and fraudsters evolve faster than any regulation or corporate internal controls. These criminals are sophisticated, exploiting new weaknesses and constantly adapting to technological detective efforts.  Much of the debate around fraud prevention and detection has so far fallen on the shoulders of auditors, given the high-profile corporate collapses of recent years. But ultimately, it is the responsibility of management to improve their own approach to managing fraud risk. As auditors step up their efforts to curb fraud, so too must organisations.

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The rapid evolution of corporate governance trends witnessed in the United States over the past few years is expected to continue in 2023. As corporations grapple with complex corporate governance matters including environmental, social and governance (ESG) issues, cybersecurity, and cryptocurrency, they will also continue to face volatile economic conditions, supply chain disruptions, and workforce challenges. During this period of heightened regulatory scrutiny, proactive corporations that anticipate and manage these rapidly changing trends can mitigate risk exposure, volatility, and shareholder and stakeholder concerns, thereby positioning themselves for success in today's competitive business landscape. Below are several key issues to watch in the new year.

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Ensuring accurate financial reporting is one of the most important and most often overlooked aspects of operating a successful business. Armed with accurate information, a company can pursue expansion in the form of loans, credit lines, horizontal and vertical mergers, etc. Before delivering financial information, management must trust that their accounting and finance teams are providing information that is free of (at a minimum) fraudulent activity. Even then, many lenders require a review by a public accounting firm before granting access to financing — and lenders and investors often require additional levels of assurance over time. Overall, these engagements are not meant to detect fraud, but to provide users of financial statements with easily understood and trustworthy information.

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Understanding the importance of corporate governance is critical for all companies, even small- to medium-companies. Good corporate governance can help companies to build business integrity and plays a role in risk management. While public companies typically need to have corporate governance in place, it can be beneficial to all companies looking to create a stronger foundation. Consider what the corporate governance of a company is and why it matters. Exactly what is corporate governance aside from what seems like a set of rules that companies have to follow? Though it may seem like just rules to follow (and can even be a bit of a complex process to set up), it’s a must for most of today’s companies, especially in the area of social responsibility. Like it or not, your company’s customers have opinions, and meeting their objectives (or at least not going directly against them) can help with your branding or hurt it if you’re not careful.

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Central banks’ risk management policies are influenced by a mix of approaches, but the Risk Management Benchmarks 2023 found that ISO 31000 and COSO-ERM are still the frontline frameworks for risk managers. Over nine-tenths (91%) of 32 participating institutions said ISO 31000 was a key tool. A further three-quarters (75%) said COSO-ERM (Committee of Sponsoring Organisations of the Treadway Commission Enterprise Risk Management) has been influential on their institutions.

Benchmarking Risk Management 2023

According to ISO’s most recent 2021 survey, ISO 37001 is becoming one of the most widely certified ISO management system standards. In 2022, there was noticeable anti-bribery management systems standard activity in certain sectors and geographies. Oil and Gas Sector – Maritime Services. Several key participants will attain certification in Q1 2023 – from 2022 audit activities. Certain global energy company “majors” began communicating the benefits of the standard to their respective supply chains – which is being read by many business partners as “we need to do it.” 

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Contact: Mr Nereo Guzman Mendoza

Email: nguzman@businesssolutionvalley.com

Tel: +52 811 181 3514

Control Quotes:

The way to get started is to quit talking and begin doing.

Walt Disney