Organizations with a solid strategy to achieve established goals are the ones that are leading the way in today’s complex business environment. Most of these companies also know that they must have a broad risk approach within their strategies to achieve those goals. Financial risk is a well-known threat that CFOs factor into their decision making and attempting to mitigate that risk through a manual approach of spreadsheets and binders is an ineffective defense that increases risk.
Your organization must be prepared to meet the growing compliance demand by eliminating manual methods that increase risk through the automation of financial processes.
3 Steps Finance Teams Should Take for Effective Financial Risk Management
Step #1: Evaluate Current Risk Management Strategy
Much of the finance teams’ time and energy is focused on completing the current pile of tasks when using manual methods. When trying to enforce a risk management framework across various spreadsheets, it produces limited visibility, timeline delays and ultimately increases risk rather than mitigating it. Relying too heavily on spreadsheets means you retain little control over your data and its analysis.
Your organization should evaluate its current level and sources of risk in order to outline ways to improve. Begin your assessment by reviewing the processes, tools and team you’re using to complete your financial close.
Step #2: Plan Your Ideal Risk Management Approach
Due to the increased risk of manual processes, leading organizations utilize an automated risk management framework. Automation allows you the time and technology needed to determine if an issue is high risk so it can then be resolved. Many organizations do not always have a risk evaluation framework in place whether it be manual or otherwise. Don’t let your organization wait for an event, such as an expansion or merger, in order to implement an established risk management approach. Instead, your organization should take a proactive approach to risk with automation that enables real-time alerts so issues can be resolved quicker.
There needs to be a clear resolution process and accurate documentation that confirms a solution when a problem is detected. Effective automation gives greater visibility into risk factors and ensures the right people are solving important issues in a timely manner.
Step #3: Establish a Proactive Approach to Risk
A variety of methods have been historically established by accountants to complete their various projects, but they are all manual. Manual methods created inconsistent processes for solving problems and completing the close is inefficient when your team isn’t aligned on a single approach. When your organization establishes an automated risk management strategy, it allows assessment capabilities to be fully actionable and you can set the necessary guidelines for tasks. In turn, it saves your organization time and assures risks are managed before they arise. Your finance team is able to evaluate problems ahead of time – moving them from reactive to proactive.
One key benefit that teams see with automation is that reconciliations can be completed throughout the month according to risk-based policies. This lowers the risk profile of the entire close and it frees up time to investigate many other risk management activities.
Implementing a comprehensive risk management strategy isn’t easy, but the benefits will be visible throughout the company. By assessing and improving your organizations risk management capabilities, an enhanced risk strategy supported by automation will help meet company goals for business sustainability and growth.
Download this eBook to explore the five key steps finance teams should take to implement an effective risk management strategy with financial process automation.
Written by: Isabella Delgado