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The latest news headlines on issues and developments affecting the internal audit profession.

Feb. 12, 2021

Group of Seven Back Global Economic Recovery Measures

Reuters reports that Group of Seven finance ministers are expected on Friday to back a new allocation of the International Monetary Fund's (IMF's) own currency, or Special Drawing Rights, to help low-income countries hit by the coronavirus pandemic. One IMF expert told Reuters that a $500 billion increase would deliver around $14 billion in added reserves to low-income countries and $60 billion to emerging markets more broadly. The Business Standard reports that the consideration comes amid calls for continued economic stimulus. It follows the Jan. 25 release of an International Chamber of Commerce study, which recommends richer countries help poorer ones with vaccination rollout, according to BusinessWorld. Without an effective worldwide distribution of COVID-19 vaccinations, the study shows, global gross domestic product could lose more than $9 trillion.

Vaccine News Spurs Fraud and Cybersecurity Risks

Amid recent positive news regarding COVID-19, there are indications that these developments have introduced new risks. One of these risks is rising levels of fraud related to vaccine news. For example, Californians have filed almost 300,000 complaints with the U.S. Federal Trade Commission related to either stimulus payment or COVID-19 vaccines. Nearly 75% percent of these claims involve fraud or identity theft, Spectrum News 1 reports. "It's not a stretch to think that attackers are going to be sending mass emails to people saying, 'Click here to purchase a vaccine or vaccines are now available in your area. Click here to download the information for that,'" said Maya Levine, a cybersecurity expert with Checkpoint Research. Meanwhile, businesses and retailers expecting to receive the vaccine are currently preparing for coordinated "bot" attacks designed to disrupt vaccine distribution, according to WJHL 11 in New York. If left unchecked, these attacks will become significant threat to national security, public health, and public confidence in the system.

U.K. Economy Fell 9.9% in 2020, Rebounded Slightly in 4Q

The U.K.'s COVID-19 ravaged economy suffered its biggest crash in output in more than 300 years in 2020 when it slumped by 9.9%, but it avoided heading back toward recession at the end of the year and looks on course for a recovery in 2021, NBC News reports. The country's gross domestic product grew 1% in the October-December quarter, according to official figures. Prime Minister Boris Johnson reimposed a lockdown last month to control a resurgence of the disease, but analysts expect the economy to rebound when restrictions are eased.

FINRA Report Helps Broker-dealers Test Compliance Programs

Buyers and sellers of securities have a new tool to help them with compliance and risk monitoring, in the form of comprehensive guidance recently issued by the U.S. Financial Regulatory Authority (FINRA), Lexology reports (registration required). The 2021 Report on FINRA's Examination and Risk Monitoring Program is meant to help broker-dealers evaluate their current compliance procedures and identify gaps or risks that need to be addressed or monitored. The report covers 19 topics — such as anti-money laundering, cybersecurity, and communications with the public — detailing regulatory requirements, recent FINRA examination findings, and suggested "effective practices" for each. The report also offers a series of questions for broker-dealers to consider in reviewing their programs, which can be used as a regulatory compliance training resource for employees.

Feb. 10, 2021

Report Highlights Ethical Behavior as the Top Reputational Risk for Business

European business strategy and communications agency BoldT's inaugural report on environmental, social, and governance (ESG) in the U.K. focuses on various aspects of reputational risk relevant to organizations. According to the ESG report, ethical behavior is rated as the top reputational risk to business, followed by labor practices and product safety and quality. "Business ethics shifted during 2020 from being a sizeable, but often intangible, risk to being the No. 1, with a sharp fall in sentiment surrounding it across practically every sector," the report reads. "It will always represent different risks to different companies, but the need to address it as a reputation priority is stark." Interestingly, environmental factors, which are commonly thought of when ESG is discussed, rank relatively low on the report's risk scale. John Rhotes, partner at BoldT and one of report's developers, says this is not a cause for concern. "There have been many years of focus on the environment part of ESG and most companies now at least have a grip on the challenges they face," he says. "The social and governance areas are now the biggest area of risk, and opportunity, for reputation."

Whistleblower Alleges Auditing Violations in China

Nikkei Asia reports that a Deloitte employee in China has alleged auditing violations involving 10 clients in China between 2016 and 2017. The whistleblower sent a 55-page PowerPoint presentation to every employee's company email address and reported the alleged violations to the China Securities Regulatory Commission (CSRC). Deloitte China said it was aware of the allegations, but asserted that its own investigation "found no evidence undermining the adequacy of its audit work." Reuters reports that the U.S. Securities and Exchange Commission has been in a decades-long struggle with China over its refusal to allow U.S. regulators to examine audits of U.S.-listed Chinese companies without approval from the CSRC and other authorities. The Deloitte allegations follow a series of financial fraud scandals involving U.S.-listed Chinese businesses that have raised doubts about the reliability of accounting firms operating in China, Bloomberg reports.

Florida Water Plant Hack Exposes Cyber Risks of City Utilities

Concerns over the vulnerability of U.S. municipal utilities resurfaced this week following reports of a cyber intrusion into a city water system in Oldsmar, Fla., the Associated Press reports. A local sheriff said a hacker used the utility's own remote access program to manipulate the amount of sodium hydroxide (lye) "to dangerous levels." The breach was observed and reported and officials maintain that the town was never in actual danger because a secondary chemical check would have caught the discrepancy. However, the nation's public water systems may be increasingly at risk because they lack the corporate oversight and funding of power plants and are less uniform in technology and security measures than in other developed countries. Lesley Carhart, principal incident responder at Dragos Security, said people in the industrial control system sector "have known for a long time that municipal water utilities are extremely underfunded and under-resourced, and that makes them a soft target for cyberattacks."

Proposed Legislation Would Ban Some Provisions of NDAs

A California state senator has introduced legislation aimed at empowering more workers to speak up about alleged discrimination and abuse by banning certain provisions in confidentiality agreements, CNN reports. State Sen. Connie Leyva successfully promoted passage of a 2018 California law that bans non-disclosure agreements in cases of workplace sexual assault and harassment. The new legislation — the Silenced No More Act — would allow workers to come forward about other claims of discrimination or bias, such as those that involve race or sexual orientation. It also would protect workers from having to sign non-disclosure agreements as conditions of their severance packages.

Feb. 8, 2021

Biden Administration Hires Personnel to Overhaul Government's Cybersecurity Focus

Among the biggest initiatives of U.S. President Joe Biden's administration is a renewed focus on cybersecurity, CSO reports. In his first days, Biden has significantly reshuffled the personnel responsible for U.S. cybersecurity infrastructure. For example, he has created a new deputy national security advisor position, which will be filled by National Security Agency official Anne Neuberger. Additionally, Biden has tapped Michael Sulmeyer for senior director for cybersecurity, Elizabeth Sherwood-Randall for homeland security advisor, Russ Travers for deputy homeland security advisor, and Caitlin Durkovich for senior director for resilience and response at the National Security Council. The first large task for this group will be to address the 2020 SolarWinds breach, which is considered to be the single worst hack in U.S. history.

Food Inflation in Emerging Markets Has Banks, Investors on Alert

Developing countries are grappling not only with the COVID-19 pandemic but also escalating food prices, which could predict inflation more broadly across economies, Reuters reports. Many countries are seeing double-digit inflation in food prices, especially for staples such as rice, soy oil, wheat, and corn. "Central banks will be watching the level of food prices quite carefully over the next few months because they will have to make a decision on whether to respond to this or not," said Manik Narain, head of emerging market strategy at Swiss investment bank UBS. According to Reuters, data from the United Nations shows that food prices are at six-year highs.

COVID-19 Variants Complicate Recovery Efforts

The U.K. released a study (not yet peer reviewed) Sunday that showed that the COVID-19 variant, B.1.1.7, which started in the U.K., is doubling its presence every 10 days and could become the dominant strain in the U.S. by March. According to Forbes, the study's authors estimated that this variant is roughly 30% to 40% more contagious than common variants, and they urged the U.S. to ramp up its vaccine rollout to counter the spread. Also on Sunday, Reuters reported that South Africa announced that it was suspending use of Oxford AstraZeneca's COVID-19 shot after data showed the vaccination gave minimal protection against mild-to-moderate infection caused by that country's dominant coronavirus variant, 501Y.V2. Instead, health-care workers will receive vaccines from Johnson & Johnson and Pfizer/BioNTech, at least for the next four weeks, until the government decides what to do with the 1 million AstraZeneca vaccines it possesses.

Australian Financial Regulator to Issue Climate Risk Framework

The Australian Prudential Regulation Authority (APRA), which oversees banks, insurance firms, pension funds, and deposit-taking institutions, said it would issue climate risk guidance in 2021, Argus Media reported. APRA said the guidance would span governance, strategy, risk management, scenario analysis, and disclosure and include a framework to assess and monitor climate-related financial risks. APRA also plans to develop a climate vulnerability assessment to help organizations "explore the potential financial exposure and macroeconomic risks for large banks, the financial system, and economy from both physical and transition climate risks," according to Argus Media. "While the financial nature of these risks is increasingly understood, there remains a need for regulated entities to enhance their capacity to manage and respond to climate risks," APRA stated. 

Amazon Warehouse Workers in Alabama to Begin Voting on Union

Amazon warehouse workers in Alabama will begin voting this week on whether to unionize, NPR reports. About 5,800 workers at the warehouse in Bessemer will vote by mail on whether to join the Retail, Wholesale and Department Store Union. It will be the first union election at an Amazon warehouse in the U.S. since 2014, when a small group of technicians in Delaware voted against unionizing, although some Amazon workers in Europe are unionized. The company is aggressively lobbying workers to reject the effort, and says those pushing for the union do not represent most employees' views.

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