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Reputational risks top board concerns.

Reporting on its Fourth Annual Concerns About Risks Confronting Boards survey, accounting and advisory firm EisnerAmper states that other than financial risk, 73 percent of more than 230 board members (from public, private, not-for-profit and private equity boards) identified reputational risk as a primary concern, a 19 percent increase since the initial survey.

The top three reputational risks cited were product quality, liability and customer satisfaction; public perception and brand; and integrity, fraud, ethics and the Foreign Corrupt Practices Act (FCPA).

Commenting on the survey results, Steven Kreit, a partner in EisnerAmper's services to public companies practice, said, "Social media exacerbates all of the major risk categories we track--financial, regulatory and compliance, fraud, privacy and data security." He noted that "social media's immediacy turns routine challenges into enterprise risks and boards need to be ahead of the curve on digital risk management to understand these threats."

Regulatory and compliance risk ranked as a concern by 56 percent of respondents. Among regulatory risks, directors cited as their greatest concerns accounting standards, including revenue recognition, lease accounting and financial instruments, tax and the Dodd-Frank Wall Street Reform Act.

When questioned about strategic direction, 87 percent of the directors indicated the significance of focusing on internal growth and expansion.

The survey shows a continuing trend in the use of, and investment in, the internal audit process. More than 60 percent of respondents stated that internal audit departments were helpful in identifying risk; the percentage rises to 73 percent for directors on public boards. (Continued on next page.)

Of note, for the first time the survey asked about the participation of women on boards: 21 percent of boards have not yet engaged in discussions about diversity in board composition. However, 47 percent had discussed this topic and were making strides to increase female board representation.

Data also show that directors expect CEOs and chief financial officers (CFOs) to have a strong grasp and deep understanding of areas such as broad-based risk assessment, creating financial models for strategic direction, cybersecurity, updates on regulatory compliance changes and aligning business goals to information technology.

Summarizing the results from the survey, Kreit said "Awareness and vigilance in addressing threats are shared by both boards and executives. Directors should have knowledge of the tools available to mitigate risk but implementation remains the role of management."

--Robert B. Hirth Jr., on being named chairman of the Committee of Sponsoring Organizations of the Treadway Commission (C050) for a three-year term beginning June 1.


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Title Annotation:RISK MANAGEMENT; EisnerAmper
Author:Heffes, Ellen M.
Publication:Financial Executive
Geographic Code:1U2NY
Date:Jul 1, 2013
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