United States: SEC Commissioner recommends that companies adapt internal accounting controls to ESG risks
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SEC Commissioner Caroline Crenshaw has recommended that companies assess and adapt their internal accounting controls to protect company assets against changing environmental, social and governance risks.
Ms. Crenshaw noted that new technological developments, the global economy and the planet come with increased risks to public company assets. She cited ransomware attacks, climate change, and unauthorized use of a company’s digital assets as examples of factors that were likely not considered by company management when their internal controls went down. were originally adopted. However, Ms Crenshaw pointed out that all of these factors have the current capacity to negatively impact a company’s operations if the right safeguards are not in place. Accordingly, Ms. Crenshaw recommended that companies (i) identify ESG risks that may impact companies and their customers, now and in the future, and (ii) assess internal accounting controls to ensure that they are sufficiently dynamic to respond to these ESG risks. .
Ms. Crenshaw further noted that investors view ESG risks as important to a company’s financial performance, and that effective internal accounting controls ensure that ESG risk information to investors is accurate and reliable. She pointed out that such disclosures allow investors to make informed decisions about the sustainability or long-term value of an investment. Ms. Crenshaw added that the existence of effective internal accounting controls gives investors confidence that a company and its assets are adequately controlled and protected.
- Speech by SEC Commissioner Caroline A. Crenshaw: Speech at the PepsiCo-PwC CPE – Control of Internal Controls Conference
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