The Top 10 Topics for Audit Committees to Consider in 2022

1. LIBOR Transition

With the formal decommission of the London Interbank Offered Rate (LIBOR) as a rate option, financial services organizations are tasked with identifying and amending the millions of contracts referencing LIBOR-based products. Audit committees should closely monitor their institution’s progress as it relates to LIBOR transition. The significant steps in that project would include identifying the population of affected contracts, creating a transition plan for each contract or type of contract, and executing that plan and accounting for it appropriately. Be sure to ask your external auditor how your institution compares to your peers in regard to LIBOR transition.

2. Environmental, Social, & Governance (ESG)

It is no secret that ESG is a current hot topic in the financial services industry. Stakeholders are becoming increasingly interested in metrics surrounding an institution’s impact in regard to their environmental and social impact as well as details regarding how the organization governs itself and addresses the impacts on these key areas. Rather than wait until reporting requirements are in place, it is important to get ahead of it now. Audit committees do not want their institutions to be scrambling to respond to mandatory reporting requirements. Doing so can lead to a significant risk of errors and other data quality concerns. Audit committees should gain an understanding of where their institution is in their ESG program. In general, most institutions can take a four-phase approach to build their ESG program as follows:

• Assess – Define what success looks like via dialogue with executive leadership, engage with the investment community to understand how they are integrating ESG into investment decisions, identify ESG risks and opportunities, identify ESG KPIs, and determine which reporting framework(s) to use
• Design – Develop an ESG narrative and messaging plan, identify data sources, develop controls for data reliability, design an ESG report, develop a communication plan for different audiences, provide transparency of reporting processes, and evaluate technology solutions for reporting
• Implement – Draft a report, using a structured, machine-readable format; conduct third-party assurance for confidence in reported information; use financial reporting processes as a model for review and approval; finalize and publish the report; execute a messaging plan; and execute a communication plan
• Monitor – Actively seek key stakeholder feedback; measure and refine reporting and messaging based on stakeholder feedback; and develop systems and processes to capture, prioritize, and assign responsibility to address stakeholder feedback

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