Corporate financial risk is a known threat that CFOs must factor into their decision-making; trying to mitigate that risk through a manual approach of emails, spreadsheets, and binders is an ineffective defense.
In today’s business world, there continues to be a steady uptick in instances of financial risk—shown below—that can impact both companies and their customers. To help you find a solution, we have identified four steps to managing corporate financial risk with automation.
|Business Risk Category||Corresponding Financial Risk Consequence|
|Strategic||Basing decisions on incorrect financial statements|
|Compliance||Regulatory government fines for fraud and misstatements|
|Operational||Time wasted on statement data corrections|
|Reputational||Loss of consumer and investor confidence|
When you’re consumed with manual methods, so much of your time and energy is focused on simply completing your current pile of tasks; it’s understandable that you haven’t yet found time to look beyond the horizon for a way to make the process more efficient and effective. And, before you can even look at ways to improve the process, you must evaluate your organization’s current level and sources of risk.
Too many companies wait until a major “life decision” is upcoming—such as an expansion or IPO—to institute a proper risk assessment framework. With automation, you gain greater visibility into your sources of the risk, and the right people can quickly identify the most pertinent issues. A finance and accounting team can demonstrate to upper management what was going on ahead of time within their processes. Automation works with you by managing corporate financial risk on a consistent and reliable basis.
Once your team has identified their existing areas of financial risk, it’s time to begin building a new, automated strategy that directly addresses each one.
Building your risk strategy manually is like building a house with bricks while using no mortar to seal up the cracks—there’s just nothing really holding your walls together.
While risk has always been perceived as part of the cost of doing business, it may not have been accorded the full respect it deserves as an ongoing threat. Financial risk does not impose itself just once a quarter, oh-so-conveniently, but is lurking ready to strike throughout reconciliations, close and reporting cycles. You need a strong and supported defense as your risk management strategy.
Executing your risk management strategy through automation allows your assessment capabilities to be fully actionable. Now you can set guidelines for tasks and materiality thresholds, saving time and assuring risks are managed before they arise.
Most importantly, finance and accounting teams need to lead the way in creating a “risk culture” within their organization. Leading the way will allow them to drive business strategy by providing valuable insights into how to best mitigate risk through automation. Mitigating risk requires you to be ready whenever it arises.
To learn more about the steps you must take to reduce financial risk during your financial close process, download our eBook.
Written by: Chelsea Downey