Evolution of LIBOR on 10-K risk disclosures

How to communicate the significance of LIBOR’s phase-out – and why it’s critical to start now

The expected phase-out of the London Interbank Offered Rate (LIBOR) poses innumerable risks, not the least of which is how well financial institutions communicate to their stakeholders why the change is so significant, and what it means for them.

Considered by the SEC to be as significant a market risk as Brexit and cybersecurity, the discontinuation of LIBOR requires attention across multiple frontline units, according to recent benchmarking research KPMG conducted among top U.S. banks as part of its efforts to monitor LIBOR transition developments.

Summarized in a new report, “Evolution of LIBOR on 10-K Risk Disclosures,” the research tracks how major U.S. banks are preparing for the move to a new reference rate. It finds evidence of banks having begun to include the discontinuity of LIBOR within the risk factors of their SEC filings (e.g., the 10-Ks) to address comments raised by the SEC and other regulators. The analysis indicates banking leaders’ awareness of the variety of impacts this transition could have on their institutions.

Communicating those impacts internally as well as externally is becoming increasingly critical. Do your employees, board members and customers know the timing and potentially extensive business impacts of the transition to alternative reference rates (ARRs)? Are they prepared for their role in the transition?

A new KPMG white paper, “Have you heard? LIBOR ends 2021: communicating on the transition,” helps firms answer these questions. It addresses the importance of developing a communication strategy as part of overall efforts to plan for the LIBOR transition.  It describes the key messages needed by a variety of stakeholder groups as well as the appropriate communication vehicles for conveying information effectively. It also outlines the guiding principles and basics of a LIBOR communication strategy, and provides a framework for ensuring that the right level of communication is delivered to the right stakeholder, through the right channel, with the right message.

Evolution of LIBOR on 10-K risk disclosures
Have you started communicating the significance of the LIBOR phase-out internally? Learn how to develop a communication strategy.