Fall 2021 Board Pulse Survey Snapshot

Keeping Up with Disclosures

Supply Chain Management

Cyber & Data Privacy Priorities

Eye on Growth Strategies

sHAREHOLDER & iNVESTOR Engagement

SURVEY SNAPSHOT

Labor shortages and scrutiny around board composition encourage more thoughtful talent recruitment and refreshment processes.

human capital management

Risk of supply chain disruption challenges boards to tackle sourcing diversification head-on.

supply chain management

Cybersecurity and data privacy continue to be significant governance issues for all companies.

cyber & data privacy priorities

M&A is the top-ranked corporate strategy. Plans to explore acquisitions and new revenue streams have risen.

Eye on Growth strategies

Coming out of the 2021 proxy season, engagement of shareholders and investors is priority #1.

Shareholder and investor engagement

Tax, Financial Reporting & Transfer Pricing

Valuation, Modeling & Interest Calculation

Contractor Remediation

Strategy & Communication

Risk Assessment

AN EFFECTIVE LIBOR TRANSITION PLAN

LIBOR reform poses a unique set of challenges to tax organizations across the globe as they work with their colleagues in Finance, Accounting, Legal, and Treasury to identify the areas of the impact and appropriate remediation. Although the effect of this disruption will vary by industry and company, all tax professionals should be aware of potential issues related to significant modification rules (Treasury Regulations Section 1.1001) and arm’s length pricing for related party loans (Section 1.482). Tax professionals who take the right preventative steps now can mitigate potential obstacles down the road.

Tax, Financial Reporting & Transfer Pricing

While the Secured Overnight Financing Rate (SOFR) has been recommended by the Alternative Reference Rates Committee (ARRC) as the preferred ARR for USD denominated instruments, several technical challenges related to the valuation of complex financial instruments remain. These challenges are expected to result in operational headaches for companies during the transitional stage. It is important for businesses to take steps now to identify the technical challenges and key modeling and valuation considerations related to specific financial instrument types.

Valuation, Modeling & Interest Calculation

Taking inventory to develop a comprehensive list of contracts, particularly related to technology and intercompany relationships, is another important step given the upcoming LIBOR transition. Amendments to contracts will likely have to be negotiated, and a lack of homogeneity between contracts may create additional challenges. Other considerations include: counterparty concentration risk associated with securitized products likely requires additional negotiation; legacy securities may lose certain features due to a change in interest rate basis; dealers may hold larger derivatives books than usual; and books will include both LIBOR and Risk Free Rate (RFR)-indexed instruments used for hedging.

Contractor Remediation

Like any project, an effective transition from LIBOR will be best implemented with a detailed plan that incorporates finance, technology and governance functions. This starts with assigning a steering committee to lead, delegate responsibilities and maintain consistent communication both internally and externally. There should be a clear roadmap that defines roles and accountability, but it should also be flexible given uncertainties and challenges that are likely to arise.

Strategy & Communication

The transition from LIBOR brings along with it a degree of risk potential which can include elements of contractual, liquidity and/or basis risk. It is therefore important for organizations that utilize or have a connection to LIBOR to conduct a LIBOR impact assessment and identify potential risk areas, taking into consideration overall exposure, compliance components and ongoing regulatory developments. This includes taking an inventory of LIBOR products and identifying the affected instruments. Given the possible extent of risk exposure, it is important to have a mitigation plan in place that considers clients, contracts and balance sheet items, scenario analyses and systems/technology.

Risk Assessment

Human Capital Management

ESG for the Near & Long Terms

ESG issues remain high on boards’ priority lists, as directors explore options on how best to comply with changing requirements and communicate their efforts publicly.

esg for the near & long terms

With annual reporting approaching, boards anticipate challenges around increasing disclosures and risks.

keeping up with disclosures

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