Board members keenly focused on risk

Corporate board members of US public companies are keenly focused on risk, but many are not comfortable with their understanding of which risks the companies are willing to take, according to new PwC survey results released Tuesday.

In the interest of reducing fraud risk, an increasing percentage of board members are:

• Holding discussions regarding tone at the top (54% in 2014, up from 46% in 2012).
• Interacting more below the executive level (50% in 2014, up from 31% in 2012).
• Holding discussions of insider trading controls (33% in 2014, up from 27% in 2012).

Seventy per cent of the 863 public company director respondents to the survey serve on boards of companies with more than $1 billion in annual revenue.

While the survey showed that more board members are conducting activities to combat fraud risk, their grasp of companies’ risk appetite has diminished. In 2012, 62% of board members said they understood their company’s risk appetite very well. That percentage dropped to 51% in 2014.

The portion of directors who said they were very satisfied with the information they receive on details of proposed investment strategies such as joint ventures also dropped from 47% in 2013 to 42% this year.

In an era when social media can almost instantly turn an isolated negative event into a worldwide crisis, directors have a much better understanding of their companies’ crisis response communication plan. In 2012, just 43% said they understood their company’s crisis response communication plan very well or moderately well. That percentage grew to 72% in 2014.

—Ken Tysiac (ktysiac@aicpa.org) is a CGMA Magazine editorial director.