Boardrooms’ awareness of cyber risks has been recently growing in Europe, Middle East and Africa, with cyber security ranking far up on the agendas of non-executive directors in the region, according to Deloitte’s recent report entitled “EMEA 360 Boardroom Survey: Agenda priorities across the region.” The report reveals that innovation is also gaining ground with 60% of respondents ranking it as a very important issue. These findings among others were the focal point of the Deloitte report highlighting the views of 271 non-executive directors across 20 countries in EMEA.
“This Deloitte study is unique because it provides an exclusive perspective on the issues boards of directors in the region are currently facing,” said Rami Wadie, Enterprise Risk Services partner and Corporate Governance leader at Deloitte in the Middle East. “Whereas board effectiveness in the Middle East has been a key issue in the past 12 months, concerns about global recovery are expected to become more significant, which may be a reflection of the current and perceived future state of the oil industry and forecast oil prices.”
Moreover, highlights from the Deloitte report include the following:
Growing relevance of cyber security
According to the survey, cyber security has become a far more important issue for non-executive directors, ranking it far higher on their agenda for the next 12-24 months in comparison to the past year.
When asked to rate board awareness of cyber risks, only 48% gave a high rating, while 20% gave a low one. Despite its importance, less than half of respondents said that their organisation currently has an action plan in place to deal with cyber security of which 5% said they have nominated a board member as the cyber security expert with the remainder either believing that this was a matter for collective board responsibility or that management dealt with it.
Notable differences are found between industries; among the respondents within manufacturing industry, cyber security ranks high on the board agenda for only 38%. In the life sciences sector, although half of respondents indicated a high level of awareness, 33% gave it a low ranking.
“Cyber security is one of the biggest future threats for companies. The boards have to be aware of the dangers that come with further digitisation. But so far many companies still sleep on the possible threats for their business – they have to take action, the sooner the better,” explains Wadie.
Innovation gains in importance
The results of the survey show that innovation is high up the board‘s agenda. Product innovation was the area receiving the most attention of board members (63%), followed by business model innovation with 49%. Digital innovation is also an important component of many organisations’ innovation plans (47%). Only 9% of respondents said that their organization did not have an innovation plan, and a further 6% indicated that an innovation plan was still in the process of development.
Digitization on the rise
Digitization has also become much more important, rising by seven places in the ranking due to its broad and ever increasing reach. Data analytics, the Internet of Things, robotics and other innovations are new technological possibilities that affect all industries, with new digital competitors are emerging to challenge incumbents in many traditional sectors.
Considering those rankings, Wadie commented: “Digitization is a hot topic for board members. The worldwide trend is of enormous strategic significance for companies; therefore it is also important that the topic is ranked highly on the boards agendas.”
When asked about the future skills requirements for the board, knowledge of the industry (74%) and factors relating to the future development goals of the organization were among the most prominent responses by interviewees. While skill requirements are at the discretion of the board, other criteria for boardroom diversity may be imposed by legal requirements or corporate governance code guidelines (particularly in relation to gender). When asked about the criteria used to select board members, 70% of respondents identified professional qualifications, 55% gender and 45% internationalization of the organisation and its board membership.
To view the full report, please visit the following link: http://bit.ly/1tE4rE7
About Deloitte EMEA 360° Boardroom Survey
The first EMEA 360° Boardroom Survey, conducted by Deloitte, asked 271 directors, the vast majority of them non-executive, across 20 countries in the EMEA region for their opinions about challenges facing boards with regard to several aspects of corporate governance: strategy & risk, innovation, cyber security, remuneration, talent & succession and board performance & evaluation. The aim was to obtain the views of non-executive directors across different types of organisation and from a range of business sectors. The interviews were conducted during February and March 2016. The report incorporates quantitative and qualitative data based on these interviews.
The respondents’ views may differ to some extent according to whether their company has a one-tier or two-tier board structure. Of the 20 countries participating in the survey, 13 have a one-tier board structure, three (Austria, Germany and Poland) have a predominantly two-tier structure and the other four (France, Italy, the Netherlands and Romania) have both or other options available. Commentaries on any differences are highlighted throughout the report. Within the press release the differences are not included.
Deloitte refers to one or more of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee, and its network of member firms, each of which is a legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu Limited and its member firms.
Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients spanning multiple industries. With a globally connected network of member firms in more than 150 countries, Deloitte brings world-class capabilities and high-quality service to clients, delivering the insights they need to address their most complex business challenges. Deloitte has in the region of 200,000 professionals, all committed to becoming the standard of excellence.
Deloitte’s professionals are unified by a collaborative culture that fosters integrity, outstanding value to markets and clients, commitment to each other, and strength from cultural diversity. They enjoy an environment of continuous learning, challenging experiences, and enriching career opportunities. Deloitte’s professionals are dedicated to strengthening corporate responsibility, building public trust, and making a positive impact in their communities.
About Deloitte &Touche (M.E.):
Deloitte &Touche (M.E.) is a member firm of Deloitte Touche Tohmatsu Limited (DTTL) and is the first Arab professional services firm established in the Middle East region with uninterrupted presence since 1926.
Deloitte is among the region’s leading professional services firms, providing audit, tax, consulting, and financial advisory services through 26 offices in 15 countries with around 3,000 partners, directors and staff. It is a Tier 1 Tax advisor in the GCC region since 2010 (according to the International Tax Review World Tax Rankings). It has received numerous awards in the last few years which include Best Employer in the Middle East, best consulting firm, and the Middle East Training & Development Excellence Award by the Institute of Chartered Accountants in England and Wales (ICAEW).
New Moneypenny Survey Shows How Office Life has Transformed in Post-lockdown Return to Work
A new survey by leading outsourced communications provider, Moneypenny, into the return to work post-Covid lockdown, shows that almost half (45%) of office workers surveyed are returning to work immediately, with a further 31% due back in the next one to four months, however 48% admit to having some concerns about COVID risks and a further 15% are not at all comfortable about going back to the office.
For some workers the return to work has been further delayed, with 5% not required to return to work until January 2021 at the earliest, and 18% having no specific date to return.
The North East and East Midlands have the most workers already back at work among those surveyed (53% in both regions) compared to the East of England which has the lowest proportion (41%).
Navigating the new commute
A reluctance to use public transport is shown in the fact that only 16% of those surveyed will use it to commute, while 66% will use their car. The East Midlands had the highest percentage of workers choosing to drive to work, with 81% saying they’ll commute by car, compared to 53% of those in London. Manchester had the lowest percentage of workers stating they’d be using public transport, with only 7% claiming it to be their commuting method of choice, while London had the most (29%).
Local Office Economy
In a blow to those hoping returning workers will boost the local economy, the survey showed more than 35% said that they won’t be visiting any local amenities when they go back to work. There is a clear difference between the age groups however, as 51% of those aged 18-24 and 41% of those age 25-34 said they’d visit a nearby sandwich bar, compared with 21% of 45-54 and 11% of 55-64s who would do this.
Wearing masks in the office
The survey showed that 61% said their company has made masks compulsory, of which 28% require them to be worn at all times, in all areas, while 33% require them to be worn only in communal areas. A further 26% said their company has made masks voluntary and they plan to wear one, while 13% said they are voluntary but they won’t wear one.
When asked whether they minded having to wear a mask at work, 37% said they had no problems with the new rule, however, a further 36% said they would find it too much to do a whole day of work wearing a mask and 13% said they don’t mind wearing a mask at work short-term, but would be less happy if the policy was for the long-term. A disgruntled 9% don’t like having to wear a mask at work at all, as they feel it inhibits their freedom and human rights and they don’t like being told what to wear. A further 2% said they’ll refuse to return to work so long as masks are compulsory.
In larger cities, masks are more likely to be compulsory at work, with 40% of those in London stating that their companies have already made them compulsory for all areas of the office, compared to just 14% of those surveyed in Yorkshire.
Co-workers and social distancing
Social distancing at work is clearly a concern, as 16% of those surveyed said that they don’t trust their colleagues to social distance in the office, while 37% trust some, but not all colleagues. Scotland’s workers seem to be the least trusting, with 23% of workers stating they distrust team members.
Death of the tea round?
Some offices have banned the sharing of equipment completely (cited by 31% of those surveyed) while even without a ban, a further 35% said they won’t be sharing stationery and equipment with colleagues.
Even the tea rounds have been called into question. While 47% said they will make teas and coffees for their colleagues, 38% will only make tea for themselves and 14% said their companies have banned tea rounds.
Office workers in the East of England are most likely to only make drinks for themselves (51%), in contrast with London, where 25% will make drinks for themselves.
Commenting on the survey, Joanna Swash, CEO of Moneypenny said: ‘We were interested to see how many office workers are either already back at work or will be going back in the next few months. While there is inevitably nervousness about Covid risks, it is positive to see the large proportion of people who are happy to work with their company in following the new health and safety rules and we’ve certainly been impressed by how innovative and agile our own clients have been in adapting to the new normal at work.’
Honest services wire fraud and the need for caution on multilateral development bank projects
By Joshua Ray, Legal Director, Rahman Ravelli www.rahmanravelli.co.uk
A recent court case extended US prosecutors’ extraterritorial reach for tackling corruption. Joshua Ray explains the implications for those accused of wrongdoing on multilateral development bank (MDB) projects
Imagine the following scenario: You are an executive for a Paraguayan construction firm that has just secured a contract with the Paraguayan government to build a hospital in that country. The scale of the project means you will need to hire a number of subcontractors and, as you are in charge of choosing those subcontractors, you decide to seek bribes from those wanting the work. Such action is ill-advised and morally problematic. But as commercial bribery of this sort is not illegal in Paraguay, you may have breached your company’s code of conduct but you have not committed a crime under Paraguayan law.
Yet, unfortunately for you, the funds for the hospital were loaned to the Paraguayan government by the World Bank via a wire transfer from its Washington DC headquarters. And under a recent decision from the US Second Circuit Court of Appeals, United States v. Napout, you may have just committed “honest services” wire fraud under US law—even though you never stepped foot out of Paraguay and did not break your home country’s laws. The Napout decision is important as it expands the extraterritorial reach of US prosecutors’ anti-corruption efforts. For the reasons that I detail below, it has significant implications for foreign businesses, especially those engaged in projects sponsored by multilateral development banks (MDBs), whose financing comes from the US.
As they did after the 2008-2009 financial crisis, the World Bank and other MDBs are counteracting the current virus-induced global economic downturn with plans to deploy hundreds of billions of dollars in loans, primarily to governments in the developing world. Much of this will be parcelled out to private sector entities to construct hospitals, testing facilities, sanitation systems and other important infrastructure. Such projects carry the risk of corrupt local officials and business leaders siphoning off such funds for themselves. MDBs are mandated by their charters to take all reasonable steps to combat fraud and corruption on MDB-financed projects. They do not have law enforcement powers but they satisfy their mandate by building provisions into their contracts with direct borrowers (e.g. governments) that compel the borrowers to adhere to the highest ethical standards during the execution of MDB-financed projects. MDB contracts require borrowers to give the banks freedom to audit any of their books and records that relate to MDB funds.
This right of an MDB being able to audit the books extends to any indirect beneficiaries of MDB funds for a project, such as suppliers, consultants and contractors. Such third parties must also agree to submit to the MDB’s jurisdiction to investigate and sanction them for corruption, fraud or other misconduct. Punishments imposed by MDBs can be harsh, and can include debarment; where a company is prevented from bidding on MDB-financed projects for a number of years or even indefinitely. When an MDB uncovers misconduct through its own investigations it can – and often will – refer its findings to national law enforcement agencies; which can mean even more serious problems for those investigated.
The significance of the Napout decision regarding such situations is that it enables US prosecutors to pursue MDB-related bribery even when the purported wrongdoer is not subject to the US Foreign Corrupt Practices Act. Prosecutors can now pursue suspects for such bribery even if that suspect is not a US company, issuer or agent and has no other connection to the US.
The Second Circuit’s Decision
The appellants in Napout, Juan Angel Napout and Jose Maria Marin, were two former executives at football’s world governing body, FIFA. They had been convicted of using their positions to obtain millions of dollars in bribes relating to the sale of marketing and broadcasting rights. Napout had been president of Paraguay’s national football federation and Marin held the same post in the Brazilian football federation.
They both appealed on the basis that their convictions were the result of impermissible extraterritorial applications of the US honest services fraud wire statute. The crux of their argument was summed up by Napout’s counsel, who argued that the US had no authority to police the relationship between a Paraguayan employee and his Paraguayan employer and an alleged scheme involving South Americans that took place almost entirely in South America.
The issue of whether the honest services fraud wire statute had been improperly extended to extraterritorial conduct was then reviewed by the Second Circuit. It concluded that as long as a wire fraud scheme involves a wire transmission from, into or through the US that is “essential” or more than “merely incidental” to the overall crime, the extraterritorial application of US law was permissible.
The appellants argued that honest services wire fraud was a materially different crime than regular wire fraud, as the focus of honest services wire fraud was not the use of the wires but the bad-faith breach of a fiduciary duty owed to the scheme’s victim. They argued that as the actual conduct underlying an honest services fraud scheme occurred abroad, it could not be prosecuted in the US solely because it used US wires. But the Second Circuit disagreed: all that was required to uphold Napout’s and Marin’s convictions were facts showing that the use of US wires in their case (transfers of bribes in and out of US banks) was “essential” to their scheme. On that issue, the Court easily determined that the wires were essential: at least $2.4M of Marin’s payments were sent to his New York bank account and $2.5M of Napout’s were paid in US dollars generated by wire transfers originating in the US.
Implications for Participants in MDB-Financed Projects
The decision in Napout is relevant to MDB-financed projects as it clarifies the breadth of the honest services wire fraud statute and shows the ease with which US prosecutors can use it to target conduct that occurs almost entirely abroad.
The “honest services” variant of wire fraud is somewhat unique to US law and it is not universally recognised: a main piece of Napout’s defence, for instance, was that honest services bribery in a commercial context was not illegal where his conduct took place. But in the Second Circuit’s view, this fact was largely irrelevant. The Court ruled that the men had violated the statute by knowingly violating their duties to FIFA under the organisation’s code of ethics.
So, what does this mean in practice? The Napout decision confirms that the reach of US anti-corruption efforts extends far beyond the bounds of the FCPA; which applies only to bribes paid to “foreign officials” by US issuers, domestic concerns or their agents. Using an approach based on honest services fraud, all that US prosecutors need in order to have jurisdiction is for an “essential” US wire to be used in the scheme. As several of the main MDBs are based in the US – including the World Bank and Inter-American Development Bank – a fraud or corruption scheme involving MDB money could easily make “essential” use of a US wire transmission; thus rendering the offenders subject to possible US prosecution.
This is an important point for companies and individuals participating in MDB-financed projects to keep in mind: even if commercial bribery is legal (or at least widely accepted) in the country where the project takes place, if the ultimate funding is flowing from the US then extreme caution must be taken to ensure that US wire fraud statutes are not violated. This is particularly critical for projects taking place in developing countries where accepted business practices have not yet caught up with norms elsewhere.
Do your contracts and policies stand up to the Covid-19 test? A view from the UK
By Amy Cooper of Ius Laboris UK firm Lewis Silkin
The coronavirus pandemic and lockdown have stress-tested employment contracts and policies, with some showing signs of strain. What should you do now to make sure your employment documentation is ready for the post-Covid future?
A host of new issues for employers has arisen out of the pandemic, from health and safety concerns, to handling furlough and unanticipated homeworking. Employment contracts and policies were not drafted with the current situation in mind, yet restrictions on how people live and work could continue until a vaccine or effective treatment is found, possibly for years. And it seems likely that, as we gradually emerge from the shadow of coronavirus, it will be into a different world of work where home and flexible working is standard.
Furlough and changes to hours and salaries
In March, the UK government intervened to protect millions of jobs with its Coronavirus Job Retention Scheme, encouraging employers to furlough their staff rather than make redundancies. But most employers did not have any contractual right to ‘furlough’ or lay off staff. The concept of furlough leave was completely new and lay-off clauses in employment contracts are unusual, as are flexibility clauses that might allow an employer to reduce employees’ salaries or hours.
As a result, many employers have had to seek explicit agreement from employees to vary their terms where furloughing or changes to hours or salaries have been necessary to avoid redundancies.
Working from home
For those businesses that unexpectedly had to ask employees to work from home, there have been numerous other concerns. These include the health and safety of employees working in their homes, over which employers have little oversight and control.
Also problematic is the protection of personal data where employees are more likely to be using personal devices for work or work devices for personal reasons. And another issue is information security and confidentiality. This is more difficult to manage where employees are hosting calls and meetings at home with family members or housemates in earshot, or they do not remember to lock away any devices and documents.
Finally, grievances, disciplinaries and performance management problems may still need to be dealt with, albeit remotely. Most employers’ policies did not envisage or provide for this eventuality.
These concerns need to be managed in the short term, but they may also become longer-term issues for those employees who opt to work from home for the foreseeable future. Employment contracts should be updated as necessary, and certain terms such as place of work may need to be renegotiated.
Some employers may also wish to reconsider salaries. For example, some employees are paid a premium to work in central London: it may be decided that such high salaries are not justified if they do not need to live in London or spend thousands of pounds commuting. Conversely, if employees work from home, they may wish to be provided with home office equipment and possibly recover other expenses.
Some work cannot be done from home and employees, such as those who work in factories, supermarkets or on building sites, have in many cases continued going to the workplace throughout lockdown. These employers have different problems, such as implementing new health and safety measures in the workplace and ensuring employees abide by them. They may also have new data protection issues as they seek to collect more health data about employees, which might require new policies or changes to their privacy notice.
An increasing number of employers will face issues of this kind as they start to plan for the return of staff currently furloughed or working from home.
Employers’ policies on sickness absence and sick pay are unlikely adequately to cover employees who are self-isolating in accordance with government guidance but not unwell. Although we hope that Covid-19 will not be with us forever, it would be good practice to amend sickness absence provisions to set out expectations for employees who are either suffering from the virus, shielding or otherwise self-isolating. Alternatively, a temporary policy could be introduced covering these matters.
What should employers do now?
Some problems employers are facing will only require short term solutions, while others might need permanent changes to contracts and policies. Bear in mind that we may see a second wave of coronavirus in the coming months which might result in another lockdown, or there could be local lockdowns or further requirements for vulnerable employees to shield. Employers should think about whether they need any of the following:
- A temporary homeworking policy dealing specifically with health and safety, information security and data privacy, supervision and management, provision of homeworking equipment or how to expense any necessary items. If employers think employees may wish to work from home much more in future, they should start considering what sort of permanent homeworking policy they may require.
- An updated health and safety policy or a return to work policy that considers relevant matters in the workplace (e.g. masks, 1m+ distancing, safety equipment, cleaning, shared spaces, one-way systems) and also how to manage employees’ commute so as to reduce risks. A return to work policy could also deal with data privacy issues and new conditions on processing health information.
- Revision of disciplinary, grievance and performance management procedures to cater for remote working, for example, holding meetings by video conferencing, accompaniment, conduct of investigations.
- A temporary change to sickness policies to deal with employees who are not sick but are self-isolating, quarantined after returning from abroad, or ‘shielding’ because they are clinically extremely vulnerable. Employers may want to pay employees sick pay in these circumstances even if they’re not ill, for example, to prevent those who may be ill from coming into the workplace and infecting others. They may also wish to amend policies to deal with any notification or evidential requirements.
- Any changes to contracts of employment? Employers may wish to consider a range of new contractual provisions, such as including a right to lay off employees if work diminishes, or rights to alter working hours, the place of work, or to redeploy employees (e.g. to cover work if other employees are sick). If an employee’s place of work is changing permanently, the employer may want to renegotiate the contract.
Employers should take advice on their specific situation before attempting to make changes to contracts and policies. This can be a troublesome area and, if not handled correctly, could lead to employees claiming constructive dismissal on the basis that the employer has committed a fundamental breach of the employment contract. And remember that, even where employees agree to changes, the employer is still constrained not to exercise its contractual rights unreasonably by the term of mutual trust and confidence that is implied into every contract of employment.
Employers should also bear in mind that if their contracts and policies are regarded too unfavourably, employees may simply vote with their feet and choose to work elsewhere. On the other hand, judicious changes to employment contracts of employment could give employers valuable flexibility to operate in the emerging, post-Covid world of work.
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