Growing inflation, rising interest rates, and the risk of recession, combined with many macroeconomic challenges, continue to put a massive strain on the Office of Finance.
To combat these challenges, finance leaders must rethink current strategies by championing modernized processes and adopting proven technologies that save time and money, increase the value of work, and improve employee retention and morale, while reducing organization risk overall. Moving from primarily manual processes to advanced automation, the Office of Finance can identify gaps to prioritize and build action plans to mitigate the four key organizational risks facing the business:
Key Organizational Risks Facing Organizations
- Strategic Risk
- Operational Risk
- Compliance Risk
- Reporting Risk
Strategic Risk threatens the ability to deliver expected outcomes, which can harm the organization’s capability to grow and prosper.
Spreadsheets weren’t created to provide a direct line of sight into the complex financial processes that F&A (finance and accounting) teams tend to use them for currently. With manual processes, the Office of Finance lacks proper visibility and cannot drive insight into the business for long-term success, ultimately creating strategic risk for the organization.
“Being able to generate strategic insights with agility was a key focus for us when we decided to implement our Trintech solution, and that focus only increased. Those things we had in place were no longer ‘nice-to-haves’ — they were fundamental to our ability to successfully run the business remotely through a period of constant change. It’s all about intelligence — ‘How can I turn data into intelligence?’ The value of our Trintech solution, especially over the last 15 months, has been critical to our organization.” – Dallas Cowboys
However, shifting your financial close process from disparate spreadsheets to a single repository supports the business in optimizing resources effectively and reduces the organization’s strategic risk by improving the overall visibility and providing real-time data analytics for decision-making.
Operational risk is the potential for losses resulting from disruptions to day-to-day business operations. This organizational risk can have a financial impact, damage the organization’s reputation, and weaken its compliance.
Everyone, from CEOs to stakeholders, wants a clear view of the company’s financial position. Unfortunately, human errors are common in F&A teams that juggle multiple manual processes with data that is low on visibility and high in workload. Instead of reviewing the reported data before sending it to leadership, teams often pass along numbers they lack confidence in to keep the processes moving.
With misstatements in your financials – there is a ripple effect on all other processes throughout the entire organization – minor errors compound into more significant issues, bottlenecks delay processes, and increased operational risk becomes inevitable with misleading or disconnected financial forecasts.
“One of the biggest benefits is that our Trintech solution gave us visibility into the bottlenecks in our existing process and highlighted where we needed to make changes. You can’t continue to improve if you don’t have that initial visibility into how things are operating today.” -Bitstamp
Rather than relying solely on spreadsheets, an automated solution can minimize the inherent risks of conducting the process manually and improve the integrity of all financial statements while allocating time for your Office of Finance to focus on other items that impact the wider organization.
Compliance Risk threatens a company due to a violation of external law or requirement. An example of compliance risk in the Office of Finance is the inability to produce timely financial statements following applicable accounting rules such as GAAP.
Organizations can combat this organizational risk by implementing and following risk-based internal controls and a risk framework. Strong and effective internal controls create a safety net that mitigates compliance risk. This ensures that the Office of Finance has met all external and internal financial compliance requirements.
“Cadency provides us with true visibility into the status of every general ledger reconciliation and increases compliance and accountability throughout our organization.”– Keurig Dr. Pepper
Changes to current processes, such as increasing regulatory requirements, bring along workflows that F&A teams must integrate into the financial reporting process. CFOs will look to automate as many manual processes as possible and search for streamlined workflows to incorporate these additional requirements into their existing financial reporting processes while also looking for ways to optimize and automate the financial close process to support their F&A teams.
Reporting risk threatens the ability of leadership to monitor performance. It allows for proactive risk management as organizations identify and escalate issues as they arise or before they are realized.
“By automating our controls, it enables us to prevent errors, gives us confidence over our reporting and that our processes are operating as efficiently as possible.” – Serco Group
Monitoring and reporting your strategic, operational, and compliance risk is as important as a timely close. So, while a fast close may seem like a win, it means nothing if the data is unreliable.
For stakeholders, fast and high-quality financial reporting accurately gauge good controls, so inaccurate, incomplete, and untimely financial reports carry significant risk to organizations.
With various teams of people having access to and inputting data into multiple spreadsheets, there is little to no control over what management and staff have access to along the audit trail, further increasing the likelihood of inconsistencies creeping in.
Financial close automation can mitigate this reporting risk by storing the data in a single solution to be accurately monitored and managed.
The bottom line is that inaccuracies, inconsistencies, and delays in the financial process come at a price.
Taking the time to evaluate these four organizational risks associated with a manual and decentralized financial close process may save your business time, and money, and allow your organization to stay ahead of the competition!
Written by: Lauren McCrohan