Not only has there been an increased emphasis on regulatory compliance, but executives around the globe are putting a substantial focus on risk management strategies as their organizations grow and look to streamline their controls across their Record to Report process.
In addition to utilizing risk management as a tool to drive their business strategy, companies need to focus on preventing mistakes that could lead to financial catastrophes. Using automation is no longer a "nice-to-have" but a necessity for an organization to fundamentally transform its operations. Manual processes do not offer real-time visibility into the close process, so organizations lose valuable insights on existing or potential risk.
The Office of Finance Should Be the Heart of Risk Management
One of the most integral roles the CFO plays in an organization is effectively managing risk and executing it across the entire enterprise to align with their corporate risk profile. Now more than ever, with the rise in advanced technologies, there are more risk factors that organizations need to address, such as privacy, data, artificial intelligence, and reputational — in addition to financial and regulatory or compliance risks.
While managing risk shouldn't be the entire responsibility of the Office of Finance, it starts there. It makes sense because all organizations need to produce reliable and accurate financial statements to prevent restating their financials. Without resilience in risk management processes, organizations are at risk of financial damages or losses.
Given the pressure to manage complex processes, using spreadsheets as a way to manage the financial close puts the Office of Finance — and by extension the entire organization — at risk. Spreadsheets are risky, time-consuming, and create more work and manual processes for the accounting department. Due to the possibility of unintended and increased errors, there may be more work because of the additional manual remediation processes to address these issues.
Ultimately, relying on spreadsheets and manual processes expose the organization to risk and endanger the reliability and accuracy of reported financials.
Risk Management Best Practices
To promote a culture of risk mitigation and improve your organization's overall risk framework, there are several risk management best practices you can integrate into your organization. To start, think of how you can establish a healthy risk culture effectively — doing so enables organizations to keep up with regulations and effectively drive their decision-making process.
For instance, you need to look at the overall goals of the organization and how to tailor the specific risk goals to align with them. Factors to consider include the corporate risk tolerance level and the specifics of risk challenges in the organizational environment. Knowing where you stand will help you see where you can shift strategies to align with your goals.
Granted, most organizations already have some form of risk management practice — this can serve as a starting point to see how to adapt to current and new areas of risk. However, you need to have a clear understanding of how the budget is being used in order to promote and maintain risk management strategies. Outlining and maintaining clear documentation to identify where you're spending will ensure you are optimizing your budget.
Effectively using your most precious resources — time and money — is the ultimate goal of implementing the best risk mitigation strategy. Organizations should align their risk management strategy to spend time where needed with higher risk areas and use technology to automate areas that are lower risk. This ensures human capital is empowered to perform more efficiently.
Leveraging technology ensures you can focus on creating a solid risk management foundation, enabling everyone in the organization to confidently use relevant information to take risks and make confident decisions efficiently.
Using Automation to Manage Financial Risk
Implementing a digital transformation strategy removes manual aspects of the close process, ensures your team spends more time acting on compiled data and reduces sources of expenditure and sources of risk for your organization. However, to receive the full benefits of digital transformation, strategies need to be extended to all parts of the organization. This tracks that all risk factors — and not simply ones relevant to the Office of Finance — are addressed to enable a connected enterprise.
Creating an effective risk management strategy that connects all members of an organization can be a complex process. To simplify the process, organizations need to adopt integrated technologies that can work with their existing systems and frameworks so that risk can be measured and improved over time.
Trintech understands these types of challenges and has been working with organizations for over 30 years to streamline the financial close process, while reducing risk and increasing accuracy.
To learn four major steps your business should follow to implement an effective risk management strategy, download Trintech's eBook "4 Steps To Managing Financial Risk With Automation" to learn the four major steps you should take to implement a solid risk management strategy with financial process automation to ensure your company is prepared for adherence to the ever-growing compliance demands.