Risk & Economy » Reimagining risk

Learn more about how finance leaders are approaching data and enterprise risk management.

Finance leaders are thinking seriously about risk. CFOs have always had to deal with risk, but now they are recognising that they have to address different types of risk at the same time.

The importance of risk has grown exponentially in recent years as the macro environment becomes ever more uncertain. The tremor of the financial crisis is no sooner subsiding as Brexit and threats to international trade are becoming real threats to the global and domestic economy.

Added to these factors are the waves of disruption that are impacting on companies everywhere, often determined by new technologies that are disrupting processes that have been in place for decades.

Risk and opportunity

But with risk also comes opportunity. Finance leaders can play a key role in capturing value for their organisations, by drawing valuable insights from the vast amounts of data the finance function holds.

With the ability to communicate effectively to the board and other parts of the business, finance leaders are uniquely positioned to make the critical decisions needed to manage changing risk and identify key opportunities for growth.

KPMG says: “Today’s CFO is managing an ecosystem of expanding complexity- thinking and operating globally, leveraging financial data and analytics to achieving profitable growth, challenging and enabling strategies, and capitalising on a dynamic regulatory environment- all with a view to achieving competitive advantage.”

As such, the finance leader can see risk and opportunity in the same light, recognising that striking the right balance between the two is vitally important in driving profitable growth.

But the challenge to this notion comes from the nature of risk management- which is very different from what it meant even a few years ago. Looking forward, many describe the future environment as one that poses a multiple set of risks, described by many as the ‘VUCA’ world, featuring a set of conditions that are “volatile, uncertain, complex and ambiguous”.

In Dun & Bradstreet’s Reimagining Enterprise Risk survey, global finance leaders provided insights on three main risks being faced by enterprises – a missing link between risk and strategy, misuse of data, and the challenges of relationships in risk management.

The missing links

Interestingly, a crucial connection amongst the top five risks identified in the study is the “human element”, whether driven through cyber security risks or through internal talent management – it is a risk that many organisations find challenging to quantify or predict.

The findings also recognised that many finance leaders are actively using data to help manage enterprise risk, but that the data itself is becoming a risk- with challenges being faced around sourcing the right data, as well as difficulties integrating it across the organisation.

Anthony Scriffignano, Dun & Bradstreet’s chief data scientist, says: “The idea of risk is getting turned on its ear by data. If you think about the kind of risks that an organisation faces, the types of risks that it had yesterday don’t go away.

“But layered on top of risks such as fraud, currency arbitrage and compliance are risks like cyber-security and cyber terrorism, and people misusing information in unintended ways.

“The world is changing very quickly- and deep learning, behavioural analytics and understanding relationships are the only keys to tackling these emerging risks,” he says.

But finance leaders are starting to understand the need to embrace risk – with a strategy that has data at its heart. Indeed, finance can play a pivotal role in tackling enterprise risk with data by helping the organisation to understand where relationships exist and how to navigate them.

Armed with the right data, the right strategy and the right team, finance has the potential to scale new heights- by reimagining risk as an opportunity for data-inspired leadership.