We asked audit committee chairmen (and women) what their committees are grappling with in the year ahead. With the passage of the Dodd-Frank Act in 2010, it’s obvious from their responses that compliance with government regulations has become a huge concern. But so is monitoring the organization’s risks, including IT risks, and figuring out how to make a profit in an environment of low interest rates.
What do you believe are the top issues facing audit committee members in 2012 and into 2013?
We need to focus on developing the appropriate stress tests for our institutions to determine, monitor and support our capital adequacy; focus on liquidity risk as macro-economic conditions improve and many of our institutions face a run-off of deposits to higher earning assets; and institutionalize the lessons learned during this credit cycle.
- Robert F. Coleman, audit committee chairman, PrivateBancorp, Inc., Chicago, IL
I think the top issues are sustaining a risk-based focus with executive leadership, adapting risk oversight at the board level to new Dodd-Frank and Fed requirements and figuring out how to make money in a flat interest rate environment for the next two years.
- Ingrid S. Stafford, audit committee chairman, Wintrust Financial Corporation, Lake Forest, IL
IT & Security Risks
I agree that compliance, particularly trying to understand what is coming with Dodd-Frank, is growing in importance. IT risk is also taking a bigger share of our time. Everything from privacy and security (including cyber-security), to emerging technologies like the cloud, social and mobile are going to be a focus for us.
- David L. Copeland, audit committee chairman, First Financial Bankshares, Abilene, TX
Compliance continues to be one of the top issues. More and more internal resources are being directed to the ever growing compliance requirements. Disclosure is another struggle. I suspect that eventually, the 10-Qs and 10-Ks will become so lengthy that no one will read them with footnotes that now span multiple pages and are seemingly redundant to matters covered in other sections of the submissions. Risk is a concern. Each of us hopes that we do not overlook the obvious.
- Gordon Budke, audit committee chairman, Banner Corporation, Walla Walla, WA
The exponential acceleration of regulations will become an increasing challenge for audit committees of all banks, regardless of size. The compliance area alone, where banks are being required to implement government policy initiatives, is a prime example of this challenge. In addition, regulators are requiring extensive documentation of all actions taken and not taken in a culture where risk is to be reduced to zero. Therefore, the audit committee's role is changing rapidly and must constantly be reassessed with these increasing responsibilities.
- John E. Seward, Jr., audit committee chairman, Bank of Tennessee, Kingsport, TN and Carter County Bank, Elizabethton, TN
I believe the top issues confronting audit committees this year and next are developing, implementing and monitoring audit plans, including internal audit. These plans are focused on the identification and weighting of risk elements arising out of the transition of the banking industry from the defensive/capital conservation strategies of the past three years to the growth/capital deployment strategies to be implemented over the next several years. The economy and the need for bank financing will expand together with the regulatory risks presented by the Dodd-Frank legislation.
- Timothy B. Matz, audit committee chairman, PacWest Bancorp, San Diego, CA