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

Jan. 8, 2021

Risk Management Projected to Be Among Most In-demand Skills for IT Professionals Through 2025

According to a new report from Atlas VPN that analyzed a database of 1 billion job records, the demand for IT professionals with risk management skills is expected to increase in the next five years, TechRepublic reports. This is the third largest increase in demand for the cybersecurity skills measured. Application development security ranked as the skill with the highest projected growth at 164%, followed by cloud security at 115%. The report also considered what the expected salary boost would be for each respective skill; cloud security IT professionals can expect a $15,025 increase, application development security IT professionals a $12,266 increase, and risk management IT professionals a $13,379 increase.

After D.C. Events, Boards Must Set Tone of Mutual Respect

In the wake of this week's shocking political unrest at the U.S. Capitol, board members need to actively demonstrate strong, positive leadership, business experts said in Agenda (paywall). Many business leaders have already strongly denounced Tuesday's violent events, but boards must do more, said Cathy Allen, founder and chairman of third-party risk firm The Santa Fe Group. "The board has to set the tone at the top," Allen said. "So the worst thing, I think, is to totally ignore this and act as if nothing has happened." According to Allen and others, boards should set a tone of mutual respect, ensuring the physical and psychological safety of employees. Executive coach and George Washington University professor Rita Meyerson said that boards must also focus more broadly on people and culture to help organizations move forward in the areas of diversity, equity, and inclusion. "Whether it's leadership values, culture — a sense of 'this is how we operate' — then that needs to be embedded into the performance management and total rewards systems," she said.

Labor Department Issues Final Rule on Gig Worker Classification

The U.S. Labor Department has released a final rule that makes it easier for businesses to classify workers as independent contractors — a victory for gig-economy companies such as food-delivery and ride-sharing services, according to Dow Jones (paywall). The new rule likely will make it more difficult for workers such as DoorDash or Uber drivers to be counted as employees under federal law, which means they would not be covered by federal minimum wage and overtime laws. The rule will not go into effect until after President-elect Joe Biden is inaugurated on January 20. The Biden administration could seek to delay implementation of the rule or write a new version.

U.S. Job Losses in December Signal Cooling Economy

The U.S. Labor Department reported today a decline of 140,000 positions on nonfarm payrolls in December, falling well below economists' expectations for a gain of 50,000, according to CNBC.com. The first monthly drop since April, the contraction was primarily attributed to bars, restaurants, and other businesses in the hospitality industry, which lost nearly half a million jobs as restrictions were added to rein in a surge in COVID-19 cases across the country. CNBC also published the results of an ADP report showing that private payrolls declined by 123,000 in December, again signaling a cooling economy. 

Jan. 6, 2021

Pandemic Will Slow World Growth for Next Decade, World Bank Says

The global economy could be in for "a lost decade" with subdued growth after the COVID-19 pandemic triggered the worst recession since World War II, CNBC reports. Global potential growth — which assumes the economy operating at full employment and capacity — will slow to 1.9% a year from 2020 to 2029, the World Bank said in its biannual Global Economic Prospects Report. Before the pandemic, potential growth was expected to be 2.1% per year over the 10-year period. Among other factors, the bank said persistent unemployment and worldwide school closures will result in a loss of knowledge and skills in the labor market.

Limited Government Aid for U.K. Businesses Brings Cash Flow Risks to the Forefront in 2021

As U.K.-based companies enter into another lockdown following the latest COVID-19 outbreak, many are questioning whether they have the cash flow and government support necessary to survive this time, Bloomberg (paywall) reports. According to a survey of 6,203 businesses conducted by the British Chambers of Commerce, four in 10 firms said their cash flow deteriorated in the fourth quarter of last year. Although Chancellor of the Exchequer Rishi Sunak has extended aid to companies in the form of UK£9,000 ($12,000) one-time grants, many experts say this is not enough. "Cash is the major problem facing companies right now," Adam Marshall, director general of the British Chambers of Commerce, said in a Bloomberg Television interview. "Government has put billions and billions into supporting businesses and employment. You wouldn't want them to fall within sight of the finish."

Mass Adoption of COVID-19 Vaccine Comes Down to Conviction, Convenience, and Cost

The success of widespread COVID-19 vaccination and an end to the pandemic depends not only on vaccine availability but on citizens' willingness to get vaccinated, a new study says. In the U.S., where "low adoption of public health measures is the norm," the outlook for a national vaccine campaign remains murky, according to a recent McKinsey & Co. report. Herd immunity, which would require a 70% vaccination rate among Americans 12 and over, could not only save lives, it could boost investment and hiring and translate into an extra $800 billion to $1.1 trillion in gross domestic product by the end of 2022, the report found. However, the research group also found that "63% of respondents are cautious about or unlikely to adopt COVID-19 vaccination" — although there is some indication that acceptance is growing, according to a New York Times article. McKinsey analyzed the success of past public health initiatives, such as flu vaccinations and widespread seatbelt adoption, and recommends actions that governments, health providers, insurers, and employers could take to improve the odds of a successful U.S. vaccination initiative.

FRC Details Reasons for Record Penalty for Autonomy Audit

The U.K.'s Financial Reporting Council (FRC) issued its complete 270-page report on its record £21 million ($28 million) sanction of Deloitte UK's audit of Autonomy, a software firm, according to Financial News London (paywall). The report said Deloitte and former partners Richard Knights and Nigel Mercer were culpable of "serious and serial failures" in their audit of Autonomy between 2009 and 2011, thereby enabling the company "to present a misleading picture of its financial position." In 2011, U.S. technology firm Hewlett Packard bought Autonomy in a deal that led to years of legal battles related to claims that Autonomy's revenues were inflated falsely. The tribunal report said misconduct by Deloitte and its former partners included allowing Autonomy to mislead regulators as well as failing to apply professional skepticism, challenge materially misleading statements in Autonomy's accounts, and obtain sufficient appropriate audit evidence.

Jan. 4, 2021

Eurasia Group Identifies Divisions Over U.S. Election as Top Risk of 2021

A new report released by political risk consultancy the Eurasia Group sees a divided U.S. resulting from the presidential election as the top risk to note for 2021. "Donald Trump's refusal to accept the outcome of an election that he declares was stolen is unique in American history, underscoring how divided America has become — and will remain," the report said. "A superpower torn down the middle cannot return to business as usual." Additionally, the report also flags 10 geopolitical, climate, and individual country risks that could derail the global economic recovery. These include implications for zero net emission goals, U.S.–China tensions, and global data control. Risks related to Latin America ranked lowest on the risks identified. Following the introduction of vaccinations for COVID-19, the report also highlights that uneven recoveries, variance in vaccine access, and ineffective stimulus measures may also leave workers displaced and fuel opposition toward incumbent leaders.

Minority-owned Small Businesses Struggled to Secure Relief Loans

Thousands of minority-owned small businesses were at the end of the line in the U.S. government's coronavirus relief program as many struggled to find banks that would accept their applications or were disadvantaged by the terms of the program. Data from the Paycheck Protection Program (PPP) analyzed by the Associated Press show that many minority owners who applied for a relief loan didn't receive one until the PPP's last few weeks while many more white business owners were able to get loans earlier in the program. The program, which began April 3 and ended Aug. 8, handed out 5.2 million loans worth $525 billion.

SEC Will Require Climate Change Risk and ESG Disclosure

The U.S. Securities and Exchange Commission (SEC) will institute rulemaking and guidance on the federal monitoring of environmental, social, and governance (ESG) issues, according to the National Law Review. These rules will require U.S. publicly listed companies to disclose climate risks and greenhouse gas emissions under President-elect Biden's administration. Reuters notes that the Trump administration relied on a "principles-based approach" to climate disclosure. That approach relaxed some regulatory requirements, including the conflict-of-interest rules for independent auditors under Regulation S-X, Compliance Week reports. The Biden administration's decision to require specific ESG and climate risk disclosure follows complaints from investor advocacy groups about inconsistencies among voluntary disclosures, the National Law Review article explains.

AP Answers Questions on New Fast-spreading COVID-19 Variant

New COVID-19 mutations are a concern among governments and organizations trying to determine if these rapidly spreading variants pose a greater threat.Associated Press News recently published frequently asked questions on a variant dominant in the U.K. that has now spread to the U.S. and other countries. According to Dr. Philip Landrigan, a former U.S. Centers for Disease Control and Prevention scientist who directs a global health program at Boston College, the U.K. variant has quickly become dominant because it "out-competes the other strains and moves faster and infects more people." However, Landrigan said there is no indication so far that the strain is more severe or deadly or that it is any less susceptible to vaccines, but scientists are closely watching it. Dr. Tedros Adhanom Ghebreyesus, director-general for the World Health Organization, said suppression is the key to tamping down new, possibly dangerous variants. "The more we allow it to spread, the more mutations will happen," he said.

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