This is the Open Data Institute (ODI) response to the UK government consultation on its white paper Restoring trust in audit and corporate governance: proposals on reforms launched by the Department of Business, Energy and Industrial Strategy (BEIS) in March 2021.
Background
The government has launched a consultation on wide-ranging reforms to modernise the UK’s audit and corporate governance regime.
The UK is consistently placed as one of the leading destinations for foreign investment in Europe and around the world, but in recent years, investor and public confidence in how businesses are governed has been undermined by large-scale company failures, such as Carillion, Thomas Cook and BHS, leading to severe job losses and corporate bail-outs paid for by taxpayers.
To improve corporate transparency and strengthen the UK’s position as a world-class destination for investors, the government has launched a consultation on a white paper for wide-ranging reforms to modernise the country’s audit and corporate governance regime, targeting the UK’s biggest businesses and ensuring markets work effectively.
The white paper seeks views on proposals to strengthen the UK’s framework for major companies and the way they are audited, including the creation of a new regulator – ARGA (Audit, Reporting and Governance Authority) – to replace the Financial Reporting Council (FRC). The proposals respond to recommendations made by independent reviews commissioned by the government in 2018, and the objectives of the reforms are to:
- restore public trust in the way that the UK’s largest companies are run and scrutinised
- ensure that the UK’s most significant corporate entities are governed responsibly
- empower investors, creditors, workers, and other stakeholders by giving them access to reliable and meaningful information on a company’s performance
- keep the UK’s legal frameworks for major businesses at the forefront of international best practice
ODI response
We are responding to the consultation with an open letter.
We believe that the ambition of the reforms do not go far enough, and that to meet the government’s strategic objectives, there is action around data needed in three key areas within audit and corporate governance.
We argue that there is a need for policymakers, the governance profession and the proposed new regulator ARGA to work together in the following areas for business and consumer trust and confidence:
- data for effective corporate governance: supporting the development and implementation of environmental, social and corporate governance (ESG) data reporting
- accountability of data users: mechanisms for auditing a range of data practices are needed around data use, data sharing, and data re-use
- accountability of data providers and data intermediaries: mechanisms for auditing data provenance and data exchange are needed around data use, data sharing, and data re-use
We draw on our research to demonstrate that some of the most significant impact opportunities for improving trust between organisations are in emerging contexts where there are not yet established mechanisms for improving, demonstrating and assessing trustworthiness. These include:
- new use cases for data (for example, repurposing data in novel ways or new digital technologies such as AI)
- evolving data ecosystems (where current organisations are taking on new responsibilities in relation to data collection, data maintenance, data sharing, or data analysis)
- new sectors and markets
Addressing these needs and opportunities will help ensure that the UK can be a world-leading destination for global investment, and help ensure the UK fulfils its ambitions around the National Data Strategy and the AI Roadmap.
Read our open letter in response to the consultation below:
To find out more, you can read about our work on data assurance here, as well as recent commentary for the Financial Times by our VP and Chief Strategy Advisor Jeni Tennison on the importance of innovating in new types of data services that build trust, particularly around audit and assurance.