In a business environment where a damaging Twitter post can have disastrous effects on a company’s financials, reputational risk remains the top nonfinancial concern for corporate directors, according to a new survey report.
Another risk rooted in technology—cybersecurity and information technology risk—is rising quickly among directors’ concerns, according to the fifth annual Board of Directors Survey report by accounting, tax, and consulting firm EisnerAmper. The report is available at tinyurl.com/mega5hm.
Directors from more than 250 boards participating in the survey were asked which areas of risk—aside from financial risk—were most important to their board. Respondents—who participate on boards of publicly traded, private, and private-equity-owned companies as well as not-for-profits in the United States—could list multiple areas of risk concern.
Almost three-fourths of all respondents (72%) listed reputational risk among those areas, nearly identical to the 73% who listed reputational risk in 2013. Meanwhile, cybersecurity and IT risk rose nine percentage points from 2013 to 62%, overtaking regulatory compliance risk, which fell six percentage points to 50%.
Private company directors chose cybersecurity and IT risk as their No. 1 concern.
Accounting standards remain a significant area of regulatory compliance concern for board members. As companies begin to digest the new, converged accounting standard on revenue recognition, which was released in May, 59% of directors said they are concerned or very concerned about accounting standards as an area of regulatory compliance risk.
Tax ranked second (57%) in areas of regulatory compliance concern.
None of the other areas—health care reform, Dodd-Frank, energy
legislation, and environmental—exceeded 42%.