Three risk areas hang over the finance department: Financial, operational and reputational. As finance directors how can we reduce them?
What are the risks?
To the modern business, the term ‘risk’ covers everything from reputation to finance, staff safety to currency exchange. The risks for each business will be quite different depending on a number of factors such as industry sector and location. For example, a currency broker operating in the UK will have a very different set of risks than a sugar cane farmer in Jamaica.
The risks we will be focusing on in this blog are those more likely to affect the finance departments of European businesses, which are: 1: Financial, 2: Operational and 3: Reputational risks.
Whether it is bonds, currency, shares or leases, most companies carry at least some financial risk. The only way to deal with these unavoidable risks is to identify the hazards, maintain visibility over them and report on them regularly to ensure you are primed to take action and avoid potential disaster.
Key challenge: As we all know, this is easier said than done. With such pressure on closing the books in time we can forget to check the risk factors and human error is always liable to creep in.
Operational risk is a rather broad concept, covering people, systems and processes that may lead to issues with the actual operation of the business. Key focuses for the finance department will be things such as fraud and human error. There have been numerous examples of fraudulent and erroneous accounting in recent years, some of which we highlight in our blog “Stop financial reconciliation errors and fraud’.
Key challenge: To discourage accounting fraud by improving the auditing trail and to reduce errors by removing the potential for human error as far as possible from the accounting processes – outcomes can be tough to achieve within traditional processes.
As you can probably already see, the above risks carry an additional threat to your reputation. Even if your business can survive the monetary losses directly resulting from financial or operational risks, your reputation may not. If your reputation as a trusted business is destroyed then it is only a matter of time before your clients move to a company with a more secure reputation.
Key challenge: Managing the risk to your reputation by finding the very best practices and technologies. The real challenge is finding the time to review the technologies and practices to find the very best for your business.
How to overcome key challenges with the Adra Match reconciliation tool:
Financial risk: By ensuring you match even the last percentage of your account data automatically you can dramatically cut down on both human errors and the time it takes to close your books. This gives you more time and confidence to tackle your outstanding risk obligations and compile comprehensive reports.
Operational risk: The Adra Match software requires users to log in and out with a unique ID and records each user’s precise actions – making the audit trail extremely secure. And since all of the reconciliation process in the Adra Match Software is either fully-automated or semi-automated there is little opportunity for human error.
Reputational risk: By using the Adra Match software you cut down on human error, create a huge fraud deterrent, solve the hidden problems as with intercompany reconciliation and other reconciliation challenges, and also ensure compliance with local and international regulation. This supports you to run a tight ship and negating a great deal of reputational risk.
Next week we will be taking a closer look at compliance and how to stay ahead of regulatory changes. If you’d like to keep up-to-date with Adra Match you can find all our blogs on our company LinkedIn page. Did you miss our blog post on Governance in our miniseries on Governance, Risk and Compliance? Read it here.