Risk Management Oversight, Innovation And Competitors Top Concerns For Private Company Directors: KPMG Survey

Staying informed about corporate activities and progress among challenges

Mar 02, 2016, 09:53 ET from KPMG LLP

NEW YORK, March 2, 2016 /PRNewswire/ -- Private-company directors say they are concerned most about risk management oversight, assessing innovation and their competitors. Meanwhile, tight budgets and potential resource constraints pose the most significant peril to their ability to manage their top issues effectively according to a new survey from audit and advisory firm KPMG LLP.

In the survey report, "Private Company Governance: The Call for Sharper Focus," 54 percent of directors polled said their board would like to hear more about financial risk management with many now looking to technological advancements to help keep themselves better informed.

"Governance models are in constant need of fine-tuning," said Brian Hughes, KPMG's national private markets group leader. "Owners and management teams need to share the right information with the right set of advisers and board members, starting with the organization's risks to help shape the vision and strategy for the organization to remain competitive."

Over a third (36 percent) of the private company directors surveyed said budget / resource constraints were the greatest challenge to board effectiveness, while more than one in four (28 percent) of them said their boards face conflicts of interest, including the presence of related parties, while 25 percent of respondents said their board had an over-representation of controlling shareholders.

In addition, the directors acknowledge that big data and analytical tools will improve boardroom decisions by helping to spot trends in company data (41 percent) and support management in allocating resources (38 percent), as well as helping with internal audit and risk management (36 percent).

The survey report, developed by KPMG and executed by Forbes Insights, explores top challenges and opportunities of private company boards, particularly with respect to financial transactions and processes, including communication flow, talent evaluation, succession planning, and adapting to new technologies.

"In order to eliminate or reduce the private company discount – real or perceived – companies need to take a hard look at governance structures, financial processes, and conflicts of interests," says Salvatore Melilli, KPMG's national private markets group audit leader.

Other key findings from the survey:

  • Risk management oversight (28 percent) and assessing innovation and emerging competition (28 percent) are seen as the greatest current / ongoing governance challenges.
  • Attracting and retaining talent (19 percent) in the finance organization is the top challenge in financial risk oversight.
  • An effective check on internal controls and / or internal controls over financial reporting (45 percent) is viewed as the top benefit of a third-party accounting review or audit.
  • Raising the confidence level of the board, investors and executive leadership in the quality and accuracy of financial audits (37 percent) is seen as the way advancements in technology, data, and analytics will enhance the value of service from a private company's accounting firm or independent auditor.

About this Report
"Private Company Governance: The Call for Sharper Focus" is based on a global survey of 154 active private company directors in September 2015.

KPMG LLP, the audit, tax and advisory firm (www.kpmg.com/us), is the U.S. member firm of KPMG International Cooperative ("KPMG International"). KPMG International's member firms have 174,000 professionals, including more than 9,000 partners in 155 countries.

Mary Fitzsimmons