News round-up: March 2020

WEF ranks environmental risks in the top five hot spots

For the first time, the top five risks in terms of likelihood in the World Economic Forum’s (WEF’s) Global Risks Report 2020 are all environmental. Several of these also top the list of risks likely to have the biggest impact.

Extreme weather events causing damage to property and to life; natural catastrophes; human-made environmental damage; collapse of ecosystems; and failure of governments to mitigate climate change risks all feature in the list of top risks to business.

The WEF report adds that risks associated with economic and political polarisation will top the risk
league table in 2020 – 78 per cent of respondents said that these were their biggest concerns in terms of likelihood and impact.

The report also warns that geopolitical turbulence and the retreat from multilateralism threatens everyone’s ability to tackle shared, critical global risks. Without urgent attention to repairing societal divisions and driving sustainable economic growth, leaders cannot systemically address threats such as the climate or biodiversity crises, it said.

For more information, read the report.

Institute president steps down mid-term: Right moment given achievement of immediate priorities

Mark Lenton has stepped down as the institute’s president due to restrictions on his time resulting from commitments within his main employed work role. As a result, immediate past president Paul Manning will return to the role, following a recent vote by council members. A new president will be elected at the institute’s annual general meeting in October.

To fill the now vacant role on council, the council has appointed Mike Taylor. Taylor was the immediate past president until October 2019 and will become joint deputy president alongside Peter Elam.

Announcing his departure, Lenton said: “It is with great sadness that I must step away. I have been honoured to be part of council over recent years, and especially privileged to serve as president. But, as president, my immediate priorities were: executive leadership continuity; and setting a path to ensure sustainability for the institute, so that it remains ‘fit for purpose’ in delivering its strategic objectives. These have been achieved, and I am delighted with the contribution and leadership that John Wood has already brought as interim CEO.

“I am incredibly appreciative of my council colleagues and the institute staff and I will continue to support them wherever I can, and of course I will be drawing on the institute’s services as a member and customer. I leave the role of president in the very safe and experienced hands of Paul.”

Paul Manning said: “On behalf of council and all our members, I should like to thank Mark for his leadership of the institute as president and for his sterling service over many years as a council director: it has been a pleasure to work with him. We are sad that he has to leave us during his presidential year, and we wish him every success for the future. We will look forward to Mark’s continuing input as a senior practitioner to help shape our profession for the opportunities and challenges which lie ahead. And it is great to welcome Mike back on to council.”

Lenton has been a council director for four years, serving as deputy president last year and as chair of its audit and business and finance committees.

Manning has been a council member for five years, and chaired the institute’s audit committee for two years before serving as president in 2018-19.

EBA publishes security risk management guidelines

The European Banking Authority (EBA) has published its final “Guidelines on ICT and security risk management”, which will come into force on 30 June 2020. These outline expectations about how financial institutions should manage the internal and external ICT and security risks they are exposed to. The guidance also explains supervisory expectations for the management of these risks, covering sound internal governance, information security requirements, ICT operations, project and change management and business continuity management.

Visit bit.ly/ebafsguidance for details.

Cyber, business interruption and regulations top global risk list

Cyber incidents, business interruption and changes to legislation and regulations are the three biggest risks to companies globally, according to research by German insurer Allianz.

Of the global businesses that contributed to Allianz’s latest “Risk Barometer”, 39 per cent rated cyber incidents as the biggest threat to businesses (particularly for companies in the US, UK, EU, India, South Africa and South Korea). Business interruption, meanwhile, dropped to second position, although the report warned that the trend for larger and more complex business interruption losses continues “unabated”.

Over a quarter (27 per cent) of respondents cited regulatory trends as a key threat – tariffs, sanctions, Brexit and protectionism were the big issues. Future regulatory challenges will come from environmental impact, sustainability and climate change, it warned, as many governments struggle to reduce carbon levels.

Visit bit.ly/allianzriskbarometer for details.

FRC criticises tick-box approach to corporate governance and culture

Many of Britain’s biggest companies are still taking a “tick-box” approach to achieving full compliance with the UK’s Corporate Governance Code, rather than providing a “meaningful” explanation of how they follow the principles in practice, according to the UK’s corporate governance regulator.

The Financial Reporting Council’s (FRC’s) latest annual review found that, while the quality of corporate reporting had largely stayed the same, many companies “simply concentrated on achieving strict compliance with the code’s provisions”, which gave “little insight into governance practices”.

While most companies declared themselves fully compliant, the FRC said that many annual reports lacked information on the outcomes of governance policies and practices, “including any areas for future improvement”.

“Concentrating on achieving box-ticking compliance, at the expense of effective governance and reporting, is paying lip service to the spirit of the code and does a disservice to the interests of shareholders and wider stakeholders, including the public,” said Sir Jon Thompson, the FRC’s CEO.

The regulator said it was “disappointing” that only a few boards said they use reports on culture to aid discussions, and a small number said they had a specific agenda item on alignment of culture with values and strategy. It also found “limited discussion of assessing and monitoring culture” – many just count completed employee engagement surveys.

Visit www.frc.org.uk for details.

ICO issues draft AI guidance

The Information Commissioners’ Office (ICO) has issued guidance to help organisations explain their use of, and reliance on, artificial intelligence (AI) in decision-making, and how such technology may affect the public.

The data regulator has launched a consultation on the joint draft guidance, called “Explaining decisions made with AI”, which offers practical advice on how to explain to individuals the processes, services and decisions delivered or assisted by AI.

The guidance consists of three parts. The first, “The basics of explaining AI”, defines the key concepts and outlines different types of explanations about the use of AI in decision-making, and the importance of enabling people to challenge decisions.

The second part, “Explaining AI in practice”, helps organisations with the practicalities of explaining decisions and providing explanations to individuals.

The third part, “What explaining AI means for your organisation”, discusses the roles, policies, procedures and documentation that organisations can put in place to ensure they can provide meaningful explanations to affected individuals.

For more information, visit www.ico.org.uk

This article was first published in March 2020