April 10, 2020
UN Women issued Rapid Guide: Gender, COVID-19 and Audit, a publication that examines key pandemic-related risks that affect women and girls and considerations for incorporating gender perspectives into relevant audits. The guide notes that the pandemic affects women disproportionately in terms of safety and gender-based violence, economic impact of livelihood, burden of care-taking, lack of participation in communication and access to information, and lack of gender-based data and gender-responsive planning in public policy. The publication lists key risks to consider during audits and describes considerations to promote the incorporation of gender into each stage of a pandemic-related audit.
Public transit agencies around the U.S. have been battered by the COVID-19 pandemic, dealing with steep declines in ridership as well as increased costs, including for accelerated cleaning schedules and protective gear for employees. Agencies could see an annual shortfall of as much as $40 billion, according to a study by the TransitCenter foundation. Internal audit can provide support to government agencies as they deal with funding challenges caused by the pandemic.
In the U.K., as in governments all over the world, the pandemic is giving rise to innovation and change at a rapid pace. According to an article in The Economist, while the public sector is not always known for its agility, leaders have had to get creative to solve problems posed by social distancing requirements, demands on the health-care system, and the need to cut through red tape to procure equipment and staff. Public-private partnerships are on the upswing and digital experiments are taking place in healthcare, the justice system, and elsewhere that will likely outlast the crisis. Public sector internal auditors can be a valuable resource, providing assurance to government agencies as they undergo significant procedural and policy changes.
On Wednesday, U.S. Securities and Exchange Commission (SEC) Chairman Jay Clayton and Division of Corporation Finance Director William Hinman issued a joint public statement that discussed the importance of being transparent regarding financial disclosures during this difficult time, as reported by Compliance Week. "We urge companies to provide as much information as is practicable regarding their current financial and operating status, as well as their future operational and financial planning," their statement read. According to Clayton and Hinman, company disclosures should respond to investor interest in regards to current operational and financial statuses, company response efforts that protect customers and members of the workforce, and any changes to financial and operational conditions that may occur as the pandemic continues. During such economic uncertainty, internal audit should work to ensure companies prioritize timely, accurate disclosures, which according to the SEC "will not only provide benefits to investors and companies, it will also enhance valuable communication and coordination across our economy."
April 9, 2020
As companies continue to evaluate their cash positions over the next 30 to 60 days, boards are expected to trim annual bonuses while working through more immediate issues facing their businesses, according to Agenda. In fact, research from Semler Brossy, an executive compensation firm, reveals that in the last month, 155 Russell 3000 companies have announced cuts to the annual salaries of their executives. Almost 40% of those companies slashed their CEO's salary by 100%. Cuts have been concentrated in the consumer discretionary and the industrial sectors, but no sector is immune. Boards also are taking pay cuts, but companies are generally in wait-and-see mode on compensation. Internal audit may be asked to look at the risks around cutting — or not cutting — executive compensation and benefits plans during the pandemic.
The pandemic is affecting departments in dramatically different ways, but one of the hardest hit is customer service. Research from artificial intelligence and machine learning company Tethr shows that pandemic-related issues, such as travel cancellations or bill extensions, have dramatically increased the level of customer emotion and anxiety in service calls, making a normal day much more challenging for customer service reps. Moreover, now that reps are mostly working from home for the first time, they're finding themselves without the infrastructure or support they once had in the office and are struggling more to help customers. Difficult interactions with customer service decreases the likelihood of new sales and increases the likelihood of defecting, which is bad news for companies. Tethr identified three tactics to help customer service reps navigate difficult situations, published in the Harvard Business Review, which can be beneficial to any department as it navigates these difficult times.
The U.S. Federal Reserve will provide $2.3 trillion to help banks provide loans to small and mid-sized companies, Reuters reports. As part of the program, the Fed will make direct loans to state and local governments impacted by the Coronavirus crisis. The new program is in addition to the loan programs that are part of the U.S. CARES Act, and is intended to speed up lending. Banks have been slow to lend money to eligible small businesses as part of the Payroll Protection Program. Businesses promised access to federal loans under the CARES Act have complained of red tape, contradictory guidance from government agencies, and delays in receiving desperately needed cash, another Reuters article notes.
To respond quickly to crises such as the coronavirus, many organizations are creating a network of teams that work outside the business' hierarchy to address problems and new priorities more quickly, according to a McKinsey & Co. article. These organizations are setting up "control towers" to take over some critical operations and other crisis-response teams that can make faster, better decisions. The article details four ways to set up such teams, such as launching them quickly and championing "radical transparency." The article notes that this structure could have ongoing benefits beyond the crisis, so internal audit should investigate whether the network of teams approach could help their organization in the coming months of recovery.
U.K. grocer Tesco is under fire for paying out a £635 million dividend to shareholders after accepting £585 million in business tax breaks as part of the U.K.'s emergency support package, according to report from The Guardian. Tesco's chairman defended the move, following the company's recovery from an accounting scandal over the last five years. He notes that Tesco hasn't taken government money from the U.K.'s new wage-support program and was not accepting value-added tax deferral or government loans. Internal auditors should counsel management and the board about the reputation risk that may arise from accepting government aid while paying shareholder dividends.
April 8, 2020
The United Nations issued the report Shared Responsibility, Global Solidarity, calling for "coordinated, decisive, inclusive, and innovative policy action from the world's leading economies." The report argues that global actions must include a comprehensive multilateral stimulus package amounting to at least 10% of global gross domestic product, with explicit actions to boost the economies of developing countries. Further, the report advocates national fiscal stimuli for "the most vulnerable" and support for small- and medium-sized enterprises, decent work, and education. Regional recommendations include examining structural, fiscal, and social measures as well as engaging the private financial sector to support businesses. Referencing the UN's 2030 Agenda and the 17 Sustainable Development Goals, U.N. Secretary General Antonio Guterres maintained that the response to the COVID-19 pandemic must lead to an economy focused on building inclusive and sustainable economies that are more resilient in facing pandemics, climate change, and the many other global challenges.
To date, it is estimated that approximately 30 million small businesses in the U.S. are financially threatened, and approximately half that number blame the COVID-19 pandemic for their drop in revenue. As states continue to unveil emergency funding measures, Forbes has compiled a list of resources that could be implemented immediately to assist small businesses who might require immediate aid to meet payroll and other obligations before resorting to layoffs. Examples include the Amazon Neighborhood Small Business Relief Fund, the Facebook Small Business Grants Program, the GoFundMe Small Business Relief Initiative, and disaster assistance loans from the U.S. Small Business Administration. As arbiters of risk, internal auditors should be informed of such resources and ensure respective stakeholders are aware of their options as they strive to survive in this environment.
About a month into telecommuting as the new normal, online IT site TechRepublic has published a list of five early lessons that includes how to scale up for the long term, preparing for potential tech failures, and helping remote staff adapt to a new work/life balance. For internal auditors, these lessons offer valuable insights to support workforce efficiency and productivity during long periods of isolation.
While it is too soon to go back to business as usual for most economies, Germany is making plans to ensure that the transition is as smooth as possible when it does happen. A group of German economists, lawyers, and medical experts recently collaborated on a report detailing what measures need to be in place for a successful easing of restrictions. Published by the Institute for Economic Research, recommendations include reopening childcare facilities, schools, and health-care product facilities more quickly, while continuing to ban large gatherings and only allowing restaurants and hotels to operate under a "very carefully and controlled manner." They also recommend a massive increase in the production of protective clothing and masks. Like governments, businesses should also have strategies in place for continuing to keep stakeholders safe in the long term.
Charities' finances will be hit from several angles during and after the COVID-19 pandemic. The impacts include cutbacks in funding from businesses trying to survive and recover, cutbacks in funding from financially strapped governments, and the effects on fund-raising and events from new forms of social interaction, reports Marketwatch. Internal audit can assist management in navigating this landscape in dealing with issues of corporate culture and reputation.
U.S. consumers are moving from "digital-often" to "digital-mostly" behavior during the coronavirus lockdown, according to PYMNTS.com research. The number of people buying groceries and placing restaurant orders online has tripled while shopping for other products has doubled over the last three weeks. However, consumers are spending less on purchases and focusing on essential items, as many are concerned about job security or have already lost their jobs. Internal auditors should advise management and the board about whether the organization is ready to provide products and services digitally in response to changing consumer behavior.
Many U.S. small-business owners applying for the Paycheck Protection Program through big banks are finding they don't qualify because they don't have the right ties to the banks offering the loans. The $350 million chunk of the coronavirus stimulus package, available on a first come, first served basis, has banks focusing on existing customers, which could hurt smaller and minority-owned businesses that are less likely to have accounts with them. Adding to the frustration of the process, the Small Business Administration's loan processing platform crashed on Monday for as long as four hours, hindering the ability of lenders to process small business loans for owners seeking relief from the impact of the coronavirus.
In a lawsuit filed Monday, the family of a 51-year old Walmart employee who died from complications from coronavirus alleges that the company failed to put in place preventative measures to the limit the spread of the virus and inadequately responded to a worker who came forward with symptoms. A second employee from the same store died four days later. Walmart has been implementing safeguards to protect employees and customers, and has extended its sick leave policy and is waiving its attendance policy for employees who don't feel comfortable coming in or aren't able to. An Agenda review of court filings has found that COVID-19-related claims – from securities class actions, insurance disputes, personal injury suits, breach-of-contract claims, and more – have already been filed against companies. Attorneys are expecting a wave of litigation as safety risks subside and businesses return to normal. This could be an ideal time for internal auditors to pay attention to health and safety risks that may not normally be on their radar.
Business and government leaders are responding to the coronavirus crisis in ways ranging from optimism in the face of the threat to realistic pessimism, a Fast Company article notes. Research finds optimism that is grounded in fact is beneficial, although it doesn't improve the leader's performance. The article points out that what works best is a combination of internal pessimism that lets leaders see problems and external optimism that nurtures hope in others.
The coronavirus has caused a dramatic drop in U.S. dairy exports, restaurant orders, and consumption, with prices falling precipitously and threatening the sustainability of dairy producers, according to Quartz. In a normal spring, dairy farms produce more milk, but exports to China have slowed because of the outbreak there and restaurants — which purchase 40% of dairy output — are ordering less during the lockdown. Supply chain issues are also contributing to the problem. As a result, dairy companies have begun to ask farmers to dump milk. Internal auditors should assess risks posed by changing market and supply chain conditions.
April 6, 2020
Stay-at-home edicts around the world aimed at curbing the coronavirus pandemic are accelerating a transition to virtual annual shareholder meetings. Agenda reports (paywall) that research by MyLogIQ found nearly 8% (230) of Russell 3000 companies have either converted their annual meeting to virtual or disclosed in their proxy statements that annual meetings would be held virtually this year. According to the Agenda article, 557 companies globally have either postponed or canceled meetings, while 560 companies will hold either virtual-only or proxy-only meetings.
According to the Small Business Administration (SBA), a limited number of Economic Disaster Loan applications may have had their personally identifiable information exposed due to a flaw in the loan application site. "We immediately disabled the impacted portion of the website, addressed the issue, and relaunched the application portal," said SBA spokeswoman Carol Wilkerson in a statement. Specifics in regard to the flaw or the extent of the data exposure has not been fully revealed. According to an article in CyberScoop, this reflects the growing stakes federal websites are experiencing in regards to website security and privacy protections, especially as Americans inside and outside the business sector turn to them for information related to the COVID-19 pandemic.
The forced closure of businesses nationwide because of the novel coronavirus would seem to be the perfect scenario for filing a "business interruption" insurance claim. But most companies will probably find it difficult to get an insurance payout because of policy changes made after the 2002-2003 SARS outbreak, according to insurance experts and regulators cited in The Washington Post.
The 2019 Global Resilience Index, put together by insurance company FM Global, ranks the resiliency of the business environments of 130 countries, based on factors that include corporate governance, risk environment, supply chain logistics, transparency, and political stability. Pairing these rankings with each country's initial response to the virus, this BBC Travel article identified which nations have a high likelihood of maintaining stability and resilience through the crisis. Experts discuss lessons and opportunities that may be gained from a closer look at the characteristics and responses of these countries.
A European news outlet focused on innovators and entrepreneurs is publishing a growing list of startups offering free or discounted tech tools and services to Europeans affected by COVID-19. The website, Sifted, connects healthcare workers, small businesses, and EU citizens with apps and other web-based tools and services. Some examples include robotic processing automation software to save nurses from spending hours on administrative data, free mobile payment and invoicing services for small businesses, discounted gig worker insurance for delivery drivers, telemedicine services for people and pets, and apps to assist with COVID-19 testing and tracking. Their innovative solutions and collaborative efforts are likely to spin off new opportunities and partnerships for the startups in the long-term.