Audit Committee Resource Guide
As the business, economic, and regulatory environments become more complex, much more is being asked of audit committees. This trend heightens the importance of staying current with changes in audit committees’ responsibilities.
Whether you are a seasoned or new audit committee member, there are many considerations to keep in mind. To help you understand what is expected of audit committee members, and what you can expect from serving on the committee, the Audit Committee Resource Guide presents an overview of the requirements for U.S. public companies.
A Corporate Governance Breakdown: Exposing companies to greater risk of fraud and corruption
Internal auditors play a vital role in reducing the risk of fraud, corruption and other corporate wrongdoing. Yet, according to Deloitte’s new analysis of member survey data from The Institute of Internal Auditors (“IIA”), 62 percent or more of internal audit (“IA”) functions at public companies globally do not comply with all of the IIA’s International Standards for the Professional Practice of Internal Auditing. The situation is surprisingly similar at private companies, governmental and nonprofit entities.
Many boards and audit committee members, and investors, may be unaware of noncompliance with IIA Standards by their internal audit function. This noncompliance may pose significant risks for company leadership, which should seek to adopt appropriate internal audit programs consistent with leading industry practices and standards.
Forthcoming changes to the insurance market landscape in 2014 and 2015 will bring many employers to a crossroad. As health care reform unfolds, markets evolve, and costs continue to rise, employers will need to make important strategic decisions to actively manage their costs and figure out how best to respond to insurance-related provisions of the Affordable Care Act (ACA or the Act).
Deloitte’s 2013 survey of U.S. employers (50+ workers) offering health benefits shows their concern and uncertainty about ACA preparedness, health care system performance, cost-reduction strategies, and the quest to find value. Among key findings:
- U.S. health care system performance — Seeking better value and health outcomes for their investment, many employers are dissatisfied with the performance of the health care system, considering it to be costly, wasteful, underperforming, and lacking in transparency.
- Affordable Care Act — Although familiar with many of the ACA’s insurance elements, three years into implementation and facing decisions around insurance exchanges and the employer mandate, the Act remains largely a mystery to many employers.
- Employer strategies and tactics — Employee cost-sharing tactics are in place but there is a gap between what employers are currently using and tactics they think could have high impact in managing costs.
Many employers are sitting on the fence with respect to any radical changes in their employee health care coverage strategy. To date, most are adopting a “wait and see” position on health insurance exchanges. Some are taking steps to help employees lower their health risks and manage their consumption of health care but could do more. Few appear to be evaluating any return on investment of wellness programs or undertaking claims analyses to drive insights and decision-making.
New strategies are likely to emerge as employers weigh their options and as the implementation of the ACA impacts their thinking. What is clear is that “doing nothing” is not an option.
Survival of the fastest: TV’s evolution in a connected world
Television is characterized by constancy and change. It delivers consistently high quality entertainment and information to hundreds of millions of homes in Europe against a background of unrelenting change. Consumer behaviors, business models, underlying technologies and the needs of adjacent sectors such as telecommunications evolve untiringly.
Hospital Consolidation: Analysis of Acute Sector M&A Activity
Consolidation in the acute sector is accelerating as hospitals seek sustainability amid increasing stress from margin pressures, regulatory compliance costs, public transparency responsibilities, operational integration in value-based delivery systems, payment reforms, and clinical improvements based on new diagnostic and therapeutic models.
How well do acquired hospitals perform financially post-merger? Do hospitals acquired by national chains outperform local/regional “in market” acquisitions? How does the performance of acquired hospitals compare to a peer group (same size) and acute hospitals?
The Deloitte Center for Health Solutions analyzed 101 hospital transactions in 2007-2008, using three measures to analyze the performance of the acquired hospital pre-merger and up to three years post-merger. The study reveals:
- The financial performance for acquired hospitals improved, but did not achieve peer group medians.
- The financial performance of hospitals acquired by national chains outperformed local/regional acquisitions as a result of lower operating costs and increased volume comparatively.
The 2014 Essential Tax and Wealth Planning Guide: A year-round resource to focus on managing uncertainty
Wealth planning in a time of uncertainty may feel as solitary as standing on a mountain ridge at sunrise, camera in hand, waiting for ideal conditions to capture that once-in-a-lifetime shot. But there are tools that can help. Just as a landscape photographer relies on a tripod, various filters, and knowledge of aperture and shutter speed, you can navigate the tax planning process by relying on your trusted tax advisor to stay informed on the latest tax law changes, relevant planning opportunities that address your current tax situation, and financial and tax risks that may lie ahead.
The 2014 Essential Tax and Wealth Planning Guide discusses opportunities available through the final few months of 2013, and the planning environment beyond as policymakers continue a tax reform debate that could fundamentally change how individual taxpayers compute their taxes.
Now in its 26th year, the guide features insight into how potential changes could impact your tax and wealth plans with an eye toward the possibility of further increasing rates — particularly for wealthy individuals and their estates. In this publication, we will help you analyze your personal circumstances and identify underlying realities as you plan in the context of today’s environment.
Global Human Capital Trends 2013
Five years after the onset of the Great Recession, companies are beginning to reset their horizons. For the last several years, human capital decisions have been largely shaped by that recession and its aftermath of weak economic growth. While the global economy continues to lurch forward, the Deloitte Global Human Capital Trends 2013 report finds companies pivoting from the recession to the new horizons of 2020.
As health insurance exchanges (HIX) prepare to launch in fall 2013, the health care industry is intently awaiting the answer to an all-important question: Will they come?
State and federally facilitated exchanges, along with participating health plans, are in full planning mode, preparing to register millions of new enrollees. But they are doing so amid uncertainty around whether eligible individuals will take advantage of these new opportunities for insurance coverage.
The Deloitte Center for Health Solutions’ February 2013 survey of consumers reveals a lack of awareness around HIX purchasing options and details, particularly among groups targeted by Affordable Care Act (ACA) provisions. The survey explores consumers’ preferences around purchasing insurance, their uncertainty about where to find value and their concerns about buying health insurance through an exchange.
With the Dodd-Frank Act’s creation of the Consumer Financial Protection Bureau (CFPB) in 2010, lawmakers signaled the beginning of a new era in consumer protection. The CFPB’s subsequent introduction of the Consumer Complaint Database in July 2012 underscored the CFPB’s intent to fulfill two core objectives: enforcing federal consumer protection laws more vigorously and analyzing consumers, financial services providers and market activities.
More than two years after the CFPB began collecting complaint data, the Consumer Complaint Database is now a public repository of over 100,000 consumer complaints. It’s a rich resource for CFPB analysts and financial institutions searching for emerging trends about consumer complaints relating to financial services products, including reasons for those complaints and actions financial institutions are taking to resolve them.
Deloitte’s analysis of the database has produced a number of valuable insights about the nature and sources of recent complaints, including:
- Troubled mortgages are behind the majority of the complaints – a growing trend
- Customer misunderstanding may create more complaints than financial institution error
- Affluent, established neighborhoods were more likely sources of complaints
- Complaint resolution times have improved
CEO Pay Ratio Disclosure: What Would It Take to Implement the SEC Proposal? (PDF)
The SEC voted 3–2 on September 18, 2013, to issue a proposed rule to implement Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act that would require most public companies to disclose the median of the annual total compensation of its employees and the ratio of the median to its CEO’s annual pay. This edition of Deloitte’s Hot Topics outlines a practical approach that companies may use to comply with the pay ratio rules if they are adopted as proposed.
Global companies are seeing a dramatic shift away from the classical employment model of hiring full-time employees to work a typical 9 to 5 hour shift to a new collaborative, transparent, technology-enabled approach. This “open talent economy” approach is outlined in The Open Talent Economy report launched today by Deloitte Touche Tohmatsu Limited (DTTL).
The Open Talent Economy report outlines five core processes which are forecasted to become the start of a new framework for planning and managing talent across the open talent economy:
- From plan and acquire to design, brand, attract, and access – The open source economy will present new challenges to workforce planning. The historical model was focused on filling capability requirements by hiring people, full or part time, to work for the company as employees, with the accompanying expectations of an organizational livelihood and career. In contrast, the emerging challenge is to plan and design work for, and to access, workforces of all types – on the balance sheet, in joint ventures, in contract and outsourced relationships, freelancers, and open source.
- From training and deployment to participation, learning, and leadership networks – In today’s rapidly evolving business environment, companies are recognizing the value of moving from command-and-control training and deployment approaches to new models built around projects and networks. In a world of continually changing project portfolios, the demand moves from outfitting and deploying employees to creating learning, leadership, and work networks that become the backbone of work structure and employee development.
- From performance management to performance engagement – Companies will need to develop new measures, new processes, and new expectations for what success looks like on all sides of the employer-worker relationship. As the workforce extends to third-party organizations, individuals, and the human cloud of ideas and effort; performance management will face the challenge of evolving to measure engagement, development, quality, interest, access, and output.
- From compensation and benefits to experience and rewards – The historical focus of total rewards programs has been on grading and sorting employees into bands while designing compensation structures and benefits schemes that generally prioritize health and retirement benefits. There are at least two emerging challenges for total rewards programs in the open talent economy. The first is to keep pace with the rapidly changing expectations of full-time employees across all the generations in the workforce, from veterans and boomers to millennials.The second challenge for total rewards is to begin the complex process of creating rewards, meaning, and careers for employees who are not on a company’s balance sheet.
- From company employee value proposition to ecosystem talent brand – As companies deliberately design and build talent networks that incorporate on-and off-balance-sheet workers, freelance workers, and open source talent, the corporate brand and employee value proposition will need to be reengineered with an eye to attracting and engaging multiple sources of talent.
Heightened regulatory scrutiny and greater concerns over risk governance have led financial institutions to elevate their focus and attention on risk management, a new global survey from Deloitte Touche Tohmatsu Limited (DTTL) finds. In response, banks and other financial services firms are increasing their risk management budgets and enhancing their governance programs.
According to Deloitte’s eighth biennial survey on risk management practices, titled “Setting a Higher Bar,” about two-thirds of financial institutions (65 percent) reported an increase in spending on risk management and compliance, up from 55 percent in 2010.
A closer look at the numbers finds, though, that there is a divergence when it comes to the spending patterns of different-sized firms. The largest and the most systemically important firms have had several years of regulatory scrutiny and have continued their focus on distinct areas like risk governance, risk reporting, capital adequacy, and liquidity. In contrast, firms with assets of less than $10 billion are now concentrating on building capabilities to address a number of new regulatory requirements, which were applied first to the largest institutions and are now cascading further down the ladder.
Global investment in the renewable energy sector is set to continue to decline in the short term from the 11 percent fall seen in 2012. This is according to the Deloitte Touche Tohmatsu Limited (DTTL) Alternative thinking 2013: Renewable energy under the microscope report.
The report identifies the important trends and opportunities in renewable energy for developers, investors, and policy-makers. The report also points out where significant barriers to progress lie, and suggests strategies for dealing with them. Despite the recent decline in investment, the study finds that renewables are becoming less alternative and increasingly mainstream, with 118 countries now having renewable energy targets in place and the wave of public demand for clean energy increasing.
Take a look at companies whose success is perennial. They sustain themselves by generating significant, positive impact for everyone their operations touch. They are keenly aware of the purpose they fulfill for clients, employees, community, and other groups – and they integrate goals to serve those groups into their business’ core activities. Therefore, establishing a culture of purpose is important to a company’s entire stakeholder universe. For successful organizations, creating meaningful impact beyond financial performance is becoming the new normal…a business imperative. The 2013 Deloitte Core Beliefs & Culture survey found that the organizations that focus beyond profits and instill a culture of purpose are more likely to find long-term success.
The Sports Business Group at Deloitte’s Annual Review of Football Finance is the only study of its kind, analysing the financial situation of football for the 2011/12 season and providing pointers to future performance.
For the first time this year, you can download a copy of the Annual Review of Football Finance Highlights, which is also available below to be used as a presentation tool on your mobile device or tablet. You may also wish to purchase a copy of the full 90 page report, including the data book, which is the definitive source for football finance statistics.
According to the findings of a recent Deloitte survey, Perspectives on family-owned businesses; Governance and succession planning, family-owned business executives may be impacting their companies’ long-term success and competitiveness due to gaps in the areas of governance, board operations and succession planning.
More than a quarter (28 percent) of respondents from family-owned businesses indicated that they do not have a board of directors. Additionally, a significant majority say their boards have no term (82 percent) or age (89 percent) limits on membership, and one-third do not evaluate or provide any compensation to board members.
"Family-owned businesses are a huge component of the U.S. economy, and their attention to good governance practices can have an impact on success and failure," says Tom McGee, national managing partner of Deloitte Growth Enterprise Services, Deloitte LLP. "Tapping into the insights and experiences of an engaged, diverse, and independent board can yield significant operational advantages in the long run. Given that these companies are considered engines of job creation, a sharper focus on governance is important to their longevity, and to the success of our economy as a whole."
Deloitte Report Uncovers Seven Crucial Leadership Conversations
Success in most organizations depends on the commitment and talent of its workforce. According to Deloitte’s third annual Human Capital Trends report, Leading Indicators, C-level executives need to take a critical look at how their company’s talent is driving its business and address seven specific issues in order to remain successful over the next 18 to 24 months.
The following seven Human Capital trends examined in the report offer leaders the opportunity to make more informed talent decisions going forward:
- The open talent economy – An organization that embraces the emerging concept of the open talent economy – a collaborative, technology-driven, rapid-cycle way of doing business – can be poised to exploit its opportunities and immerse itself more effectively in the global talent market.
- Creating an elastic workplace – Leading organizations are taking a fresh look at workplace flexibility through the lens of business strategy as the issue evolves into an opportunity that impacts all employees.
- Innovating the talent brand – In order to effectively retain and attract the best talent, companies should focus on their talent brand by building leading talent practices and communicating them in innovative ways.
- Finding the silver lining in the talent gap – The nature of retirement along with the changing ability of a generation to retire early is shifting the demographics of the workforce again. In fact, Deloitte found in a previous study that 34 percent of U.S. employees plan on delaying their retirement age. The combination of an aging workforce remaining actively employed, even when facing retirement age to an influx of talent from Generation Y, means that organizations need to determine the best way to continue to get value from older workers without holding younger workers back.
- Debunking the Superman myth – Given the ever-changing pressures on businesses today, including adopting new technologies, entering an emerging market country or adapting to new regulatory environments, companies need a bench of leaders who can operate across different environments and adapt to the unexpected.
- The performance management puzzle – To effectively motivate employees, some leading organizations are considering new performance management tools with social media characteristics that incorporate peer, customer and other stakeholder feedback.
- Thinking like an economist – HR and talent leaders should adopt an economist’s mindset and expand their use of economic data to make fact-based decisions, which not only increases their alignment with the other business leaders in their organization, but also helps put people in the right positions to unlock their most valuable talents.