The Increasingly Onerous Roles of Audit Committees

By Hanna Barry

‘Fourth bottom line reporting…is focusing on health and wellness of employees.’

HANNA BARRY: Next week Monday, October 12, assurance and advisory firm Nkonki will host the next in its series of conferences that focus specifically on assisting audit committees, this time with a focus on JSE-listed companies.

Mitesh Patel is managing partner at Nkonki and joins us now. Mitesh, thanks for your time today. Let’s start with a very straightforward question – what is an audit committee, what does it do, and why should we care so much about it?

MITESH PATEL: Thanks for having me. The audit committee overall has an oversight role in an entity responsible for governance and compliance. But we’ve seen audit committees moving past the typical finance compliance type of environment. They are moving into strategy, risk management, etc. So their oversight role is becoming quite onerous. Why I am saying this is because we are putting it in context now.

Their role is becoming critical in terms of the JSE as a whole. The JSE as a whole now – we are sitting within the top 20 in the world. That equates to about R11trn. And from our purpose back to that, R11trn is basically individual investors and institutional investors that are part of that. You have a responsibility to them as an audit committee on the boards that you sit on or the companies that you manage through an audit committee. So the oversight role is becoming more and more onerous, like I said in managing the perception of the entity, finance of the entity, strategy of the entity, risk management of the entity, to ensure that we preserve that R11trn.

HANNA BARRY: One of the speakers at your conference is Dr Derek Yach, head of the Vitality Institute, which is of course Discovery’s New York-based research think tank. Dr Yach is going to discuss fourth bottom-line reporting, which essentially aims to introduce employee wellness into the reporting matrix of organisations, along with Profit, Planet and People – that’s the so-called triple bottom line. What is the economic impact or expected impact of fourth bottom-line reporting – this employee wellness element – and how does one begin to understand and measure it?

MITESH PATEL: The fourth bottom line reporting, like you are saying, is focusing on health and wellness of employees. Some of the research we’ve seen done by the Discovery Institute actually shows that there is…R16bn lost to the economy as a result of absenteeism and prisonteeism.

The fourth bottom line reporting is going to try and move companies towards reporting with focusing on the health and wellness of the entities through a matrix where we can actually measure it. There is a call for 2020 by the Institute to get a matrix out that we can start using that as a basis for measurement, so that all companies can report consistently on it.

What we are seeing, though, is there are a lot of lifestyle diseases happening within entities, like blood pressure, as a result of various stresses, smoking, etc. So we are trying to curb that. That’s what’s fourth bottom-line reporting is all about – maintaining your health and wellness of your employees to ensue productivity, efficiency, effectiveness within your organisation.

HANNA BARRY: Thanks to Mitesh Patel, talking about the upcoming audit committee conference taking place next week. If you’d like to find out more about that, hop onto www.nkonki.com.

To read this original posting or listen to the recorded interview, click here.