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News round-up: July 2020

WEF maps preliminary risks from Covid-19 pandemic

Prolonged global recession, high unemployment, outbreaks of infectious diseases, and protectionism dominate the list of short-term worries for companies, according to a new report published by the World Economic Forum.

Two-thirds of respondents to Covid-19 Risks Outlook: A Preliminary Mapping and Its Implications identified a “prolonged global recession” as a top concern for business. Half identified bankruptcies and industry consolidation, failure of some industries to recover and the disruption of supply chains as “crucial” worries.

The report also calls on leaders to act now to protect their organisations against the onslaught of future systemic shocks, including the climate crisis, geopolitical turbulence, rising inequality, strains on people’s mental health, gaps in technology governance  and health systems that are under continued pressure.

ICO releases AI guidance

The UK’s Information Commissioner’s Office (ICO) has released guidance to help organisations explain how they use artificial intelligence (AI) in decision-making, and the way in which their technology uses personal data to form judgments.

The publication, called Explaining decisions with AI and written in conjunction with The Alan Turing Institute, the UK’s national centre for AI, is intended to help organisations to be transparent about how AI-generated decisions are made. It also wants to ensure that there is clear accountability about who can be held responsible for them, so that affected individuals can ask for an explanation.

The guidance is presented in three parts, and focuses on the key concepts of explaining AI; explaining AI in practice; and what explaining AI means for organisations and senior management.

Advice for risk committees

The National Audit Office (NAO) has published a guide to help audit and risk committees of government departments and arms-length bodies advise their organisations on financial management and reporting during, and in the period immediately after, the Covid-19 outbreak. 

In addition, the Chartered Governance Institute has published new Terms of Reference for risk committees. This is intended as a guide for companies so that they can adapt it to their needs where the board decides it is necessary or desirable to have a separate risk committee.

Verizon Data Breach report highlights sectoral variations

Organised crime is still behind over half of all successful cyber attacks committed outside organisations, according to the latest Data Breach Investigations Report by telecoms firm Verizon.

Financial gain remains the key driver for cybercrime. Nearly nine in ten (86 per cent) of attacks investigated are financially motivated, while human error accounts for a fifth (22 per cent) of breaches. The report analyses 16 industries, and shows that, while security remains a challenge in all sectors, the most prevalent crimes differ significantly according to industry.

For example, in manufacturing organisations, 23 per cent of malware incidents involved ransomware, compared with 61 per cent in the public sector and 80 per cent in educational services. Errors accounted for 33 per cent of public sector breaches – but only 12 per cent of those in manufacturing firms.

Boards lack confidence in managers’ risk reports

Prior to the Covid-19 outbreak, only 21 per cent of board members believed their organisations were “very prepared” to respond to an adverse risk event from a planning, communications, recovery and resilience standpoint, according to professional services firm EY’s Global Board Risk Survey.

Even with significant changes to risk reporting over the past decade, fewer than 20 per cent of board members were “extremely confident” about risk reporting from management on a range of significant issues, including business megatrends, new and emerging business models and culture, and conduct-related risks. Only 21 per cent were “very satisfied” with the accuracy, completeness and breadth of the risk reports they receive.

The financial services sector felt more prepared, with 80 per cent of directors indicating that they felt their firms were “very” or “nearly very prepared” to respond to events.  The report also found that, while boards play a role in communicating their reporting requirements to management, only 26 per cent strongly agreed that they do so.

European Commission unveils plan to tackle money laundering

The European Commission has unveiled a new six-point plan to tackle money laundering and terrorist financing.

The action plan rests on six main pillars. These are: ensuring EU rules are applied effectively throughout all member states through better monitoring; proposing a single EU rulebook; setting up an EU-level supervisor; better information sharing among EU countries’ financial crime units; improving judicial and police co-ordination and co-operation; and encouraging greater global co-operation to counter money laundering.

This article was first published in July 2020.