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This Week in GRC for Friday October 13

Oct 13, 2023

MBK Search launches dedicated med-tech regulation newsletter

We're excited to announce the launch of Med-Tech Monday, MBK Search’s weekly update on everything in medical device and technology regulation. Read the first issue and subscribe here.

The Opening Bell: Sandalwood

“On what planet is Birkenstock worth $8 billion?” asks Modano founder Michael Hutchens. “I’m not really sure, perhaps Barbie Land?”

The 250-year-old German sandal’s IPO tanked 12% this week, marking the worst debut by a company worth over $1 billion in nearly two years.

"What this shows is that the valuations that they are putting (on) these companies make absolutely zero sense, particularly when you're in a down market when there's so many other bargain opportunities available," said Thomas Hayes, chairman at Great Hill Capital in New York via Reuters.

Was it greed? Or was it supposed to be launched on the Sock Exchange, as someone on Reddit quipped?

Live Webinar: Is Private Investment Ready for the Regulators?

Tuesday 17 October, 12:00 EDT

Register here

The SEC's decision in August to enhance the regulation of private fund advisers sent shockwaves through the industry. A market long used to minding its own business is now having to contend with unprecedented oversight.

Everyone from hedge funds to private equity investors is asking the same question: What does this mean for us, and what comes next?

In this edition of MBK Talks, we'll explore the ruling and the steps companies need to take to stay compliant. Sign up here.

Federal Reserve Vice Chair Michael Barr spoke at the American Bankers Association Annual Convention in Nashville, TN, where he laid out the Fed's proposed capital requirements for large banks.

Among a detailed explanation of the new proposal, Barr remarked about changes to risk frameworks.

We've taken a closer look and laid out 5 things Barr said that banks should be talking about now. Read more here.

The Federal Deposit Insurance Corporation (FDIC) has proposed strict new guidelines to strengthen risk management and board oversight for banks with more than $10 billion in assets.

MBK Search’s research team has broken down the ten biggest requirements listed in the proposed guidelines. Read them here.

The Financial Stability Board (FSB) has published a new report reviewing lessons learned from distress and failures at banks like Credit Suisse and several U.S. regional banks in early 2023.

The long-awaited report analyzes implications for the FSB's international resolution framework designed for systemically important banks.

MBK Search has produced an executive summary of the report's key takeaways, including key questions all banks should be asking. Read them here.

Headlines:

The cryptocurrency industry has been battered by the collapse of crypto exchange FTX and the fraud allegations surrounding it, as well as implosions at other big crypto players. But the much maligned industry is finding it hard to attract lawyers and compliance professionals, just when it needs them the most.
A growing number of lawmakers are calling on President Biden to take tougher actions against Iran to hold it accountable for its support of Hamas militants. Several Democratic senators joined their Republican colleagues Wednesday to press the Biden administration to freeze the roughly $6 billion in Iranian oil proceeds slated to be released to Tehran as part of a prisoner swap deal last month.
Britain's accounting regulator on Thursday fined KPMG a record 21 million pounds ($26 million) for a "textbook failure" in audits of Carillion, the builder that imploded in 2018 and prompted a root and branch review of auditing standards.

In January, Alaska joined 24 states in a lawsuit against the Biden Administration to stop a rule promoting ESG investing. Four months later, the state published a sustainability report, with Governor Mike Dunleavy disavowing that it had anything to do with ESG.

Harvard Business School and Oxford University professor Roberg G Eccles examines the “complex contortions” the state has gone through regarding ESG.

Headlines:

A new survey conducted by Protiviti and The Institute of Internal Auditors (IIA) reveals which risks are keeping IT auditors up at night.
The International Internal Audit Standards Board has completed its review of public comments on global internal audit standards, and has published a list of the common themes.
In July 2023, the PCAOB published the spotlight, “Staff Update and Preview of 2022 Inspection Observations.” The article summarized the PCAOB's common findings from its 2022 inspection season. This article summarizes the key inspection findings and offers suggestions on what firms can do avoid the wrath of the regulator.

While auditors spend a great deal of time and energy scrutinizing processes, analyzing procedures and transactions, and identifying control weaknesses, the real value they bring to firms “resides in our audit recommendations,” argues Hector Garcia in this piece for Internal Audit 360.

“To provide real value in the organization, internal audit can play a vital role in advising on solutions and ensuring the hard work of remediation is completed,” he writes.

Headlines:

A new report from reinsurance broker Gallagher Re has found that the insurance industry is unprepared for large scale, systemic cyber attacks.
A former Deutsche Bank AG risk manager testified at Donald Trump’s civil fraud trial that he made decisions on hundreds of millions of dollars in loans to the real estate mogul for years based in part on financial statements that a judge has already ruled were wildly inflated.
Financier Worldwide has published an excellent Q&A with a panel of legal experts about upcoming cosmetics regulation and the impact it will have on firms’ risk management.

In 2001, Roger Pielke (author of the popular Honest Broker Substack) was approached by Nasa to help them time the re-entry of an Earth observation satellite. The problem was, the satellite’s work was still proving valuable, but extending its mission would mean it would eventually “tumble back to Earth uncontrollably”.

In this piece, Pielke explores the process of weighing up risks and benefits, particularly when it comes to insurance risl. “My view is that once we start having this discussion we will quickly learn that there are indeed some types of research that are simply uninsurable,” Pielke writes.