May 1, 2020
In an April 30 press release, Susan Keating, CEO of the WomenCorporateDirectors Foundation, the world's largest organization of women board members, discussed her takeaways after speaking with hundreds of corporate directors since the onset of the COVID-19 pandemic. These talks revealed that "boards are more involved with tactical advice right now," says Keating, adding that many are meeting weekly or biweekly and receiving weekly updates from the CEO or chief financial officer. Audit committees are actively involved in new risk assessments; and compensation committees are addressing layoffs, furloughs, and pay actions for management and directors. COVID-19 is driving discussions around pivoting and reinventing strategies, developing new business opportunities, rethinking cost models, and worst-case scenario planning. Perhaps most importantly, "boards today are having some of the most meaningful conversations they have ever had about their companies and their business," says Keating. "This is painful for many, but also a transformative time."
The U.S. insurance industry is promoting the idea of an insurance plan backed by the federal government that would help businesses that might suffer in future pandemics, Reuters reports. The campaign involves discussions with lawmakers and regulators, public statements, and regular coordination with a broad coalition of non-insurance companies such as retailers, hoteliers, and booksellers. Insurers are doing this after facing multiple lawsuits, fierce political pressure, and criticism from customers with business interruption policies for not covering their recent financial hardships due to the COVID-19 pandemic. Internal audit can help organizations evaluate the risks related to their insurance coverage.
Employment attorneys are forecasting a wave of novel litigation as businesses recover from the COVID-19 pandemic, according to Law360. The lawsuits they predict include suits alleging employers shorted newly remote workers on pay, refused to reimburse them for equipment they purchased to work from home, or refused to provide time off guaranteed by the Families First Coronavirus Leave Act. Internal auditors can help ensure their organizations are in compliance with employee-related regulations in the post-COVID-19 environment.
As businesses in certain states across the U.S. are poised to re-open in some capacity or another, many will experience confusion as to what rules and regulations are applicable to them, says an article in Forbes. Each state has set its own standards and qualifying factors, and in some states those standards can be superseded by local cities and counties. To clarify what will be open when, the article compiles a state-by-state list of what will be allowed to open and what will remain closed. It is critical that internal audit work with applicable stakeholders to determine what standards are most applicable to them, and if the organization is in a position to comply.
To minimize risk to supply chain operations and essential workers, companies are turning to digital and robotic solutions. According to an article (paywall) in The Wall Street Journal, many businesses still reliant on highly manual operations are now looking into options like contactless paperwork, collaborative robots to assist in warehouses, and e-commerce fulfillment centers. Businesses turning to logistics technology include trucking companies, warehouses, loading docks, grocery stores, and suppliers of all kinds. With the pandemic-fueled boom in online sales, companies that previously invested in logistics technology are ahead of the game.
April 30, 2020
More than 100 consumer groups signed a letter to leaders of the U.S. House and Senate urging them to resist demands by companies to put in place protections from coronavirus-related lawsuits as states start to reopen after weeks of lockdown, according to an Insurance Journal article. The letter notes that "legal liability is one of the most powerful incentives we have to ensure that businesses operate safely." The Occupational Safety and Health Administration is "dangerously relying on employers to self-police," it adds. The U.S. Chamber of Commerce and other business groups are calling for protections from lawsuits over business disruptions, wages, leave policies, and injury or death caused by the pandemic as Congress and the Trump administration consider a fourth stimulus bill.
As businesses consider how to safely bring their people back to the office, employees will have new expectations about the buildings they work in. This Harvard Business Review article discusses the framework companies can deploy to keep their employees safe, including a focus on communicating to employees that there is no such thing as zero risk. The goal is to minimize it by deploying a hierarchy of controls. Associations Now is also weighing in on how to safely reopen workplaces with guidelines from real-estate services firm Cushman & Wakefield. The firm's recently released Recovery Readiness: A How-to Guide for Reopening Your Workplace covers maintenance of building systems to prevent other health problems and social distancing practices in office spaces.
So-called "sharing economy" businesses that were riding the crest of a huge wave are crashing into the rocky shores of the coronavirus pandemic, Axios reports. Demand for ride-sharing (Uber, Lyft), home-sharing (AirBnB), and office-sharing services (WeWork) has dropped dramatically. COVID-19's impact has "brutally shut down these companies' fundamental bets" that people would consume shared services rather than own them. Internal auditors of sharing economy companies and their traditional competitors should look at the risks and new opportunities that may arise as the one-time disruptors face disruption, themselves.
Although the COVID-19 crisis has demonstrated the operational value of IT, chief information officers (CIOs) expect their organizations will cut IT budgets, according to an IDG Insider Pro article. Several CIOs interviewed said hiring freezes and cuts to projects are likely, although a PwC consultant noted that digital transformation projects may remain intact. CIOs said the crisis is a good time for their peers to think strategically about how IT can serve the organization's needs and be ready to adjust, as necessary. Internal audit could help CIOs map a path through the hard times that prepares them for recovery.
April 29, 2020
Days after a leak of hundreds of active World Health Organization (WHO) credentials was revealed, WHO officials reported a dramatic increase in cyberattacks against its staff and email scams targeting the public, according to HealthITSecurity.com. In light of these reports, WHO is working with the public and private sectors to "establish more robust internal systems and to strengthen security measures," including reinforcing cybersecurity protocols among employees. For health-care providers, pandemic-related cybersecurity guidance has been issued recently by INTERPOL, the Federal Bureau of Investigation, the American Medical Center and American Hospital Association (jointly), and the Department of Homeland Security Cybersecurity and Infrastructure Security Agency.
In an update to its technical assistance publication dealing with the COVID-19 pandemic, the U.S. Equal Employment Opportunity Commission affirmed that employers can lawfully test their workers for COVID-19. The update says employers can administer the test to employees before they enter the workplace without violating the Americans with Disabilities Act (ADA). Testing is an important consideration both for businesses that have remained in operation as essential during the pandemic or for those planning to reopen as state closure orders are eased. Internal audit can assist businesses in ensuring the tests are administered in compliance with the ADA.
As states such as Florida, Georgia, and South Carolina are taking steps to reopen at least portions of their economy, many business leaders are beginning to determine what the return to the office might look like, and what policies and procedures should be put in place to ensure co-worker health and safety, says an article in The Washington Post. New floor layouts and work schedules, for example, are likely to be considered, as will entirely new policies such as contact tracing and temperature checks that could help quickly identify infected co-workers and whom they may have interacted with. Goldman Sachs, for example, is considering adding infrared body temperature scanners to some offices, along with virus and antibody testing kits, while IBM will adhere to a series of global standards for returning to the office including staggered arrival times, the elimination of buffets and shared serving tools, and the taking out of furniture to ease social distancing in conference rooms. Longer-term, it is likely that many of these social distancing desires will creep into architectural designs, as well, incorporating features such as restrooms without doors, wider corridors, and more barriers between desks.
In planning how to reopen workplaces safely amid continuing COVID-19-related uncertainty, organizations and communities are considering ways to monitor employee health, including digital tracking tools. For example, PwC is testing an Automatic Contact Tracing check-in app that allows the company to identify employees who may have been exposed to another employee that has tested positive for COVID-19. However, such efforts may be dangerous if personal data privacy is not protected, notes this Triple Pundit article. PwC's app uses anonymous identification numbers and phone-to-phone recognition to trace employee contact, which ultimately depends upon employees to self-report COVID diagnoses. Another potential solution, published in a white paper by a World Economic Forum data scientist, relies on integrating health information into citizens' "digital identity infrastructure," which is already maintained by local civic institutions, such as hospitals and banks. This would make contact tracing more efficient, without jeopardizing personal privacy, the scientist claims.
For companies already facing excruciating decisions about laying off portions of their workforce, having a number of foreign-born workers with H-1B visas is even more of a dilemma. The H-1B visa program is designed for people with specialized skills, and visa holders may only remain in the U.S. for 60 days without being paid. According to a Bloomberg article, as many as three-quarters of H1-B holders are technology workers, and companies like Apple, Amazon, Google, and Microsoft have joined a coalition of trade groups asking for an extension to work authorization expiration dates .The companies point out that the tech industry is essential to supporting the many digital services the country is now relying on and that thousands of unfilled jobs could negatively affect the economy.
Treasury Secretary Steven Mnuchin announced new plans to scrutinize the largest recipients of emergency small business loans and signaled potential criminal penalties if large companies misrepresented their financial situation to secure the money, according to Politico. Mnuchin said the Small Business Administration planned to do a "full review" of any Paycheck Protection Program loans above $2 million before the loans are forgiven. Some of the large corporations that received loans, including Shake Shack and Ruth's Hospitality Group, have started to return the money amid pressure from the Trump administration and the public. Internal audit can assist their organizations in ensuring they comply with the provisions of the loans.
April 28, 2020
States' plans to reopen after the pandemic are drawing criticism from health experts, and employees are worried about the health risks of returning to work, according to a Fortune article (registration required). Though legal experts claim federal Occupational Safety and Health Administration (OSHA) rules protecting employees from dangerous work situations take priority over state laws, a blanket fear of catching coronavirus isn't enough justification to refuse to work. With various litigation sure to rise in the coming months, companies need to think carefully about worker safety and navigating laws and regulations, including the new Families First Coronavirus Response Act (FFCRA). The FFCRA requires companies to provide paid leave when childcare is lacking because of the pandemic and paid sick leave to those subject to government quarantine orders or who are experiencing coronavirus symptoms.
Listed businesses where executives continue to receive high pay after receiving taxpayer-funded assistance risk "significant reputational ramifications," according to new Executive Remuneration in UK Listed Companies guidelines from the Investment Association. The group, representing the largest British investors, is urging companies that have received government support during the coronavirus crisis to cut executive pay and consider clawing back bonuses from bosses. Though the U.K. government's emergency support programs have no limits on executive pay, investors worry large payments could be controversial during a crisis. According to The Guardian, more than one-third of Financial Times Stock Exchange 100 companies — including all those claiming taxpayer support for furloughed workers — have announced executive pay cuts.
The Pandemic Response Accountability Committee has named Robert Westbrooks to lead the group of two-dozen U.S. federal inspectors generals, Politico reports. Westbrooks, formerly inspector general for the Pension Benefit Guaranty Corp., will head the group's oversight of the government's coronavirus relief effort. In addition, the committee has launched a website that catalogs ongoing reviews of response activities by federal inspectors general and breaks down the intended recipients of federal aid.
Japan and Singapore may face the biggest economic declines among Asian countries because of the coronavirus pandemic, CNBC reports. Both economies were struggling before COVID-19, with Japan's economy shrinking by 6.3% in the last quarter of 2019 and Singapore's declining by 2.2% in the first quarter of this year, Moody's Analytics says. They also have among the highest number of COVID-19 cases in Asia, with new surges in cases recently that have led to partial lockdowns. Internal auditors whose organizations have operations or large sales markets in Japan and Singapore should monitor both the health and economic conditions in those countries and the rest of the Asia Pacific region.
April 27, 2020
The Council of Europe's Group of States against Corruption (GRECO) issued a statement for its 50 member states regarding awareness of fraud, bribery, and conflicts of interest related to COVID-19. The guidelines refer central, regional, and local authorities to helpful legal references and guidance and instruct them on transparency, oversight, and accountability. Recommendations focus on procurement systems, medical-related services, research and development of new products, financial scams, manufacturing, and whistleblower protections.
Senior White House and Trump administration officials are planning to launch a sweeping effort in the coming days to repeal or suspend federal regulations affecting businesses, according to The Washington Post. The effort is seen by advisers as a way to boost an economy stunned by the COVID-19 pandemic. The White House-driven initiative is expected to center on suspending federal regulations for small businesses and expanding an existing administration program that requires agencies to revoke two regulations for every new one they issue, the Post reports. Changes could affect environmental policy, labor policy, workplace safety, and health care, among other areas. Internal auditors will need to monitor these developments closely to ensure their organizations remain in compliance with the revised regulations.
After 9/11 and the 2008 financial crisis, media focus on issues relating to corporate social responsibility (CSR) waned — but then reemerged even stronger, led by companies who saw the value in managing impacts to the environment, employees, customers, suppliers, and communities. How will the economic fallout from COVID-19 affect corporate social responsibility? In this article, Hard Rock CSO Paul Pellizzari weighs in on why he thinks companies committed to CSR will be the most successful and keep customers and top talent.
Commercial and public buildings shuttered for weeks to stem the spread of the coronavirus could fuel another grisly lung infection: Legionnaires' disease. Public health experts urged landlords across the globe to carefully re-open buildings to prevent outbreaks of the severe, sometimes lethal, form of pneumonia. They said that lack of chlorinated water flowing through pipes, combined with irregular temperature changes, have created conditions ripe for the bacteria that causes the disease. Environmental, health and safety internal audit will need to ensure the risk is addressed and controls are in place as their organizations reopen.
As states edge toward reopening their economies, experts say businesses that restart operations will face a slew of legal dangers and logistical challenges as they bring back employees who have been teleworking or sitting idle, according to an article in Law360. Some of the issues employers will encounter include potential bias in rehiring, bringing workers back too soon, and shortchanging workplace safety. Internal audit can make management aware of the potential dangers and legal challenges as the economy recovers.
As the COVID-19 pandemic continues to tear apart the global economy, companies are wrestling with a loss of revenue, discontinued operations, and a host of other uncertainties. Audit committees also are wrestling with how to disclose financial and risk information when the future is cloudy at best, according to an article in Agenda (paywall). Experts remind audit committees to be vigilant, ask management the right questions, and ensure that disclosures are as accurate as they can be while recognizing that historical information may have little significance. By reporting to audit committees, internal audit provides critical guidance in decision-making.