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Rethinking Governance in Crisis: FRC Partners FITC, Provide perspectives on best practices

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The recent outbreak and rapid global spread of the Coronavirus Disease (Covid-19) have without a doubt had devastating effects on the global economy. Away from the increasing daily reported deaths, many companies have had to shut down operations or transition to remote working either as a precautionary measure or due to government directives. As a ruinous outcome, millions of employees have been rendered redundant, with several employment relationships terminated or placed on hold.

Many public companies are experiencing a dramatic fall in their stock price in light of the global financial turmoil that has become an unwelcome by-product of the COVID-19 crisis.

Generally, there is a palpable feeling of panic amongst both employers and employees as they face an uncertain future as the full but eventual impact of the pandemic remains to be seen. Businesses need to appropriately face this crisis. Each level of a corporate structure has its role in responding and ensuring that best practices are adopted.

The enormity of the situation brought about by the pandemic invites or rather forces us to reflect on the nature and effectiveness of our systems of governance, not just of health systems, but more broadly the governance of our very complex societies and their transnational flows. These events have brought to the fore the compelling importance of business continuity, succession plans, resilient leadership, backup plans, human capital, etc in the administration of businesses.

Understandably, while a lot of focus is being placed on the pandemic and the resulting fallout, there is a key lesson to be learnt from a corporate governance perspective which has itself been severely impacted by Covid-19. The administration of most companies has grounded to a screeching halt, due to inability to hold meetings: general, Board, committee and/or management, which are crucial to chartering a course through the present crisis.

Thus, the actions of the Board of directors (the Board) in preparing for times such as this becomes very important. Essentially, the Board being perhaps the most critical organ of a company due to its responsibility for the overall management, steerage and financial performance should have developed certain strategic responses to stem the tide.

For Boards of directors, a good response requires careful consideration of a range of issues that are rooted in a deep understanding of the role of the board.

How can Boards handle the challenges related to corporate governance? How can short term fire-fighting be balanced with a sense of perspective regarding a long-term purpose in the face of the pandemic?

In the light of this, the Financial Reporting Council (FRC), FITC and other top Governance leaders have canvassed for a re-think of corporate governance framework in the context of the pandemic that amongst others:

  • Will anticipate, prevent, mitigate and manage risks that come with disruptions to operations during the period of emergencies such as this.
  • Is resilient and forward-looking, with business continuity and succession plans in place to manage the risks and disruptions that these emergencies could cause having planned ahead for its sustainability and viability notwithstanding the surrounding circumstances.
  • Based on experienced and proactive structure with a deep understanding of the role of the Board— knowing when to step in and when not to, and how and when to engage in external activities—such as communicating with stakeholders, regulators, etc

This was the takeaway from the panellists’ discussion at the Financial Institutions Training Centre (FITC) Leadership Webinar series; jointly hosted with the Financial Reporting Council (FRC), which took place on Thursday, May 14, 2020, at 10 am (WAT), with the theme: Rethinking Governance in Times of Covid-19.

FRC FITC webinar flyer

FRC-FITC Webinar Flyer

Panellists on the session include: Adedotun Sulaiman, MFR (Chairman, Governing Board, Financial Reporting Council (FRC) Nigeria, Anthony Oputa, Managing Partner Designate, Ernst & Young, West Africa, Dr, Edward Olowo-Okere, Director, Global Governance Practices, The World Bank, Darrel Scott, Board Member, International Accounting Standards Board (IASB), London, Dr, Iheanyi Anyahara, Deputy Director, Financial Reporting Council (FRC), Nigeria and Chizor Malize, MD/CEO, FITC as the moderator.

While dissecting the current implications of the pandemic on both the global and Nigerian economies, the associated impact on businesses and the key implications for Corporate governance, the panellists pointed out that businesses were hard hit with huge lessons to be learnt from the corporate governance perspective which has itself been severely impacted by the pandemic. They, however, stressed that navigating the COVID-19 crisis would require careful consideration of a range of corporate governance issues under these unprecedented circumstances, and businesses with the right leadership, strategy, resilience and stewardship structure will emerge stronger from the crisis.

In his keynote address, Adedotun Sulaiman, (Chairman, Governing Board, Financial Reporting Council) Nigeria, stated that “Never before have CEOs and their Management teams been more in need of the experience, wisdom, foresight, and seasoned judgement that a well-functioning and committed Board can provide, especially as everyone is navigating uncharted waters and dealing with a unique, once-in-several lifetimes situation for which no playbook exists”.

He further stated that “Board operations during this pandemic is a vital point that directors must not ignore. While trying to guide and lend support to Management, the Boards’ primary oversight functions must not be neglected. From risk management to internal control, from financial reporting to independent external auditing, Boards must be alert to the impact of the pandemic on the business, it’s finances and economic and financial viability and possible going concern challenges and must be on the ball on how management team responds. The increased economic uncertainty and risks arising from the Covid-19 crisis and the added Nigerian specific challenges of an extremely tough and challenging business operating environment, will in all probability have significant financial performance and reporting implications, so Boards must be alive to their responsibility to ensure management and external auditors take cognizance of financial reporting guidance issued by regulators and other Government agencies”.

On the implications of the pandemic for Corporate governance, Dr, Edward Olowo-Okere, (Director, Global Governance Practices, The World Bank), provided an insightful perspective hinged on the sustainability of the corporate strategy, the leadership role of the Board, business sustainability and emergency backup plans, Communication and stakeholders’ engagement strategies and the new world order driven by adaptability, agility, speed and resilience.

On his part, Darrel Scott, (Board Member, International Accounting Standards Board), stated that the International Accounting Standards Board share concerns about the impact of Covid-19 and are actively monitoring financial reporting issues arising thereof and stand ready to support during these difficult times.

He provided a detailed update on some of the steps taken by the Board to assist stakeholders to include, Supporting the application of IFRS Standards in the light of Covid-19 uncertainty, Updated timelines for projects and consultation documents and Virtual engagement with stakeholders.

While strongly advocating for an enterprise-wide approach to risk management in the face of the pandemic, Anthony Oputa, (Managing Partner Designate, Ernst & Young, West Africa), gave a detailed and concise presentation on the impact of the pandemic on the African continent, with emphasis on public health, economic performance, tourism and travel industry, supply chain disruption and financial market downturn.

He further affirmed that in the wake of Covid-19, there will be a greater increase in pandemic related risks which will necessitate changes in risks management thinking and approaches.

He also articulated the critical success factors for Internal Audit functions to proactively contribute to organizational value in the post-pandemic era to include: Support, Management buy-in, Exposure to emerging risks, Maintain reasonable assurance and Support remote audit.

He concluded by highlighting, the following as some Internal Audit practices that are adapting to uncertainty:

  • Conducting dynamic risks assessment and reprioritizing audit activities.
  • Introducing flexibility into audit procedures through collaboration tools and remote working
  • Increasing reliance on technology by converting field audits to desktop, analytics-based reviews and accepting digital evidence.
  • Providing extensions on follow-up items to allow business focus on more pertinent issues (critical to business continuity).

While shedding lights on the mandates and functions of FRC, Dr, Iheanyi Anyahara, (Deputy Director, Financial Reporting Council, Nigeria), highlighted the Council’s main objects, as defined in the FRC Act and the key benefits of high-quality Financial Reporting.

The Chief host, Chizor Malize (Managing Director/CEO, FITC), while thanking all the participants, assured of FITC’s commitment to continuously partner with key industry stakeholders to enhance capacity and growth.

The webinar was well attended with participants drawn from different sectors including, top executives, policymakers, entrepreneurs, financial institutions, academics and other critical stakeholders across the globe.

FITC is a professional services firm providing cutting edge Learning, Advisory and Research Services to clients within and outside Nigeria. Established in 1981 as a non-profit organisation limited by guarantee to provide capacity building and knowledge hub for the Nigerian Financial Services Sector, FITC is owned by the Bankers Committee i.e. CBN, NDICand all deposit money banks in Nigeria.

Over the years, FITC has demonstrated delivery of world-class services through its core service lines of Learning, Advisory, and Research, using a large pool of multidisciplinary, and versatile professionals, who provide business support to its numerous clients within the public and private sectors, and most especially within the financial and non-financial services sectors and public sector of Nigeria and Sub-Saharan Africa.

The Financial Reporting Council (FRC) of Nigeria is a federal government agency established by the Financial Reporting Council of Nigeria Act, No. 6, 2011.  It is a federal government Parastatal under the supervision of the Federal Ministry of Industry, Trade and Investment.  The FRC is responsible for, among other things, developing and publishing accounting and financial reporting standards to be observed in the preparation of financial statements of public entities in Nigeria; and for related matters.

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