RSM’s webcast, Tackling 2021’s greatest board leadership and governance challenges, offered an executive briefing addressing key financial, regulatory and governance issues for 2021. Read below for key takeaways from our presenters.
The changing regulatory landscape
Current SEC focus areas may shift under the new administration, but currently include (among others):
- Environmental, social and governmental issues and whether to regulate related disclosures
- Critical audit matters, which should include entity-specific and useful information
- Disclosures related to cybersecurity incidents
- LIBOR-related disclosures, which should address management’s plan to mitigate risks associated with reference rate reform and the impact on financial reporting
In this COVID-19 environment (and as things change in the future), a company’s disclosures should remain principles-based—that is, focused on what is important to the company, what is material and what is useful to investors. Such disclosures include not only those related to risk and financial matters, but also those related to governance, such as audit and compensation committee matters. The Center for Audit Quality’s 2020 Audit Committee Transparency Barometer gauges how audit committees approach such public communication.
Change management implementation suggestions
When change is announced in an organization, productivity will drop. This drop in productivity can be minimized if the change in question is treated like a “process” rather than a one-time “event.” All humans’ reactions to change can be predicted, managed and measured as outcomes in the effort to return to the same or higher levels of performance
Resistance to change is unavoidable. Frequent and consistent communication is critical to uncovering that resistance and minimizing it. Organizational change management will influence behaviors that are required to successfully implement and deliver the business case or benefit ROI financial and non-financial targets quickly. This is called accelerating the time to value.
Today, many companies have too many “good ideas with a budget” and too few “strategic imperatives.” This can lead to change fatigue and impact benefit delivery. Board members should therefore question such ideas and measure them against the drivers of the company’s strategic purpose. It is be helpful for a company to identify the strategic pillars for its post-COVID-19 existence to properly value what needs to change—and, equally importantly, identify projects that are not aligned with their overall strategy
M&A deal market for 2021
Q3 and Q4 was an extremely busy M&A time, and we believe 2021 will continue to be a robust M&A season due to low interest rates and overall improved economic conditions. Here are a few areas of consideration for boards amid the buzz of M&A activity:
- Although “quality of earnings” reports often are used by deal teams as a proxy for cash flows, they also can be valuable to board members as an objective assessment of financial performance that can inform planning and strategy.
- COVID-19 continues to be a key focus of due diligence efforts with various immediate, near-term and long-term impacts. How does the company bridge to fundamental changes in its future state?
- If a company decides that M&A activity may be in its future, there are myriad tax, IT and cybersecurity considerations for such transactions.
- Leadership and culture fit is critical to M&A success and is difficult to assess. Plan for organizational change and focus on employee engagement to reach objectives.
WATCH THE FULL WEBCAST
RECORDED WEBCAST
Tackling 2021's greatest board leadership and governance challenges
This webcast will offer an executive briefing addressing key financial, regulatory and governance issues for 2021.
