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The Crossroads of Past, Present, and Future Risk Management in Finance

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By Eric Dowdell

Global Head of the Trade Credit Business

Dun & Bradstreet

October 29, 2018

Part 4 of 4: The Future of Risk Management

Finance is truly at the crossroads of burgeoning business complexity. In addition to the complexity layered into finance’s reporting and stewardship responsibilities to reflect accurately what has happened in the past in the form of regulations and compliance mandates, a gamut of risks and opportunities are emerging almost daily both within and around businesses. With so much to account for in the past and present, managing future change can seem daunting.

Yet, according to a new report by Accenture , it seems that businesses are looking to finance leadership to manage past, present, and future organizational risks to oversee their organizations’ digital transformation. “CFOs are fast becoming the digital stewards of their organizations, leveraging predictive analytics and artificial intelligence to better interpret data for key business decisions that drive value, improve efficiency and enable strategy beyond the borders of the finance function.” The report finds that over three quarters (77 percent) of CFOs believe it is within their purview to drive business-wide operational transformation. And, more than three-quarters (78 percent) say the transformation must be rapid and drastic, as traditional finance roles may soon become obsolete. Among the top five skills CFOs and finance leaders will need to be successful, Accenture says, are 1. The ability to think long-term, 2. The ability to identify, anticipate, and manage risk, 3. Insight into and understanding of new technologies, 4. Ability to hire, develop, and place the best talent, and 5. Agile and responsive ways of working.

Challenges for the Modern Finance Department

It’s certain that finance leaders are being called to lead and innovate in new ways, but the gap between desire and reality is large. Dun & Bradstreet recently found in its study,The (R)evolution of Risk Management ,that there is a large disconnect between the expectations of the sweeping evolution of the CFO’s role and how these expectations are playing out within the finance team itself. The appetite for change is large, but the reality of execution appears to hamper many organizations on their path to transformation. Dun & Bradstreet’s study found that only 20 percent of organizations are fully integrating and leveraging their organizational data to manage risk. Additionally, finance leaders in the study cited the ability to forecast or predict risk and monitor risk as the top two internal risks they face today.

Alarmingly, 80 percent of finance leaders report they aren’t currently using modern tools or technology to manage risk such as machine learning or automation. Why is there such a gap between perception and reality?

Experts on the Past, Guardians of the Present, Leaders of the Future

The existing and emerging complexity of running businesses is certainly one of the barriers finance leaders face when attempting to lead true digital transformation when it comes to managing risk. Dun & Bradstreet’s study showed that finance leaders are concerned with much more than they were twenty years ago: risks associated with the broader economy, customer viability, supply chain volatility, and technological disruption in addition to their own business’s risks. Resource constraints and increasing demands on finance leaders’ time inhibit taking a modern approach to risk management. A new framework for thinking about the purview of finance is needed to address the three-pronged challenge of managing risk in the past, present, and future.

1. To Manage the Past, Unleash the Robots

Research from Gartner shows that fears of job-stealing robots overtaking innocent workers are, for the most part, unfounded. In order to be effective, finance leaders must embrace the role that automation can play in freeing up time for more strategic tasks. The repeatable, detailed tasks involved with routine but essential finance tasks—from reporting to creditworthiness analysis—can be handled quite easily by automation.

2. To Navigate the Present, Turn to Data & Analytics

Finance leaders cite that risk monitoring is their number one challenge internally. It’s no wonder. Increasing economic volatility and technological disruption can make monitoring and understanding risk in real-time a formidable task. This is where tools such as predictive analytics, scores, and Master Data can help finance leaders navigate the murky waters of today’s risks. Though data multiplies at a rate we can barely fathom, there are tools to help us manage this data and turn it into actionable insight. For example, intelligent scoring fueled by accurate data and constantly evolving with the help of AI can help you quickly identify your highest-risk customers, partners, and suppliers without requiring additional time or resources on your part.

3. To Plan for the Future, Make the Future a Priority

The organization wouldn’t look to finance leaders for finance transformation if finance leaders lacked the skills to create and manage this transformation. Indeed, few teams are better suited for long-range, data-inspired thinking than finance. Too often, however, finance leaders are so focused on the past and present that they run out of time for thinking about the future, even though they may see this as a core priority.

It’s often not money or talent that holds transformation back, but time. Making time to create future change that will facilitate business longevity should thus not only be a high priority, but a commitment to a vision.

Time and money must be allocated year after year, day after day, to ensure business success—and the finance team is at the helm of these decisions. This balancing of resources will always be a juggling act. But, perhaps the best framework to approach modern risk management is to help steer available financial resources to using tools and technology to address what is known, and the finance team’s most precious resource of time to what is unknown.